Planning on buying a home? Here, RealtyTimes offers a few financial tips that can help you not only qualify for a loan, but get the best possible rate as well.
Don’t pay off all of your current credit cards
Your lender will tell you specifically what you should pay down and what you should leave alone, but banks tend to like responsible credit management. In some cases, that may mean carrying a small balance on one or more cards.
Don’t charge up all your cards to the limit
Responsible credit management does not mean extending every available card to its limit or only making minimum monthly payments. This will not appeal to lenders when you approach them for a loan.
Be careful with old debts
You may think that to qualify for a mortgage or to get the best rate you have to pull your credit and go back through every single entry to identify and take care of anything negative. You’re right about the first part. Pulling your credit so you know what you’re working with is critical, and financial experts recommend doing it annually, regardless of what you’re planning (or not planning) to buy. But be careful with old debts. It doesn’t hurt to ask a lender what should and should not be taken care of. But, in general, you’ll want to pay in full instead of making settlement arrangements. It’s not uncommon for debt collection companies to send out settlement offers that allow you to settle debts for less than the total amount. Although this can sound tempting, it likely won’t yield the results you’re expecting as the debt will not disappear from your credit report.