Your credit score will be the primary source lenders check when determining whether to approve mortgage financing or to assign favorable rates. Taking steps to monitor it before you submit a mortgage application will help you avoid credit obstacles and bolster your chances of securing a prime loan.
Two Years to Six Months
A mortgage is a significant financial undertaking, so begin strengthening your finances years in advance. Obtain a copy of your credit report and score. Review your report thoroughly to verify accuracy of all the information and dispute items that are listed incorrectly, especially anything that may have an adverse effect on your credit score.
Consider the amount of debt you are carrying. You want to have as little debt as possible when you apply for a home loan, so establishing an aggressive debt repayment plan in the years leading up to submitting a mortgage application will put you in a better position to secure a mortgage.
Begin shopping around for different mortgage rates and find out each lender’s particular credit score requirements.
Three Months to Closing
Pull your credit report again to ensure disputed information has been removed and that your score reflects these updates. This is also the time to begin making changes to your spending behavior. You want to prove to lenders that you are financially stable, so avoid taking on new lines of credit or closing old accounts. Many prospective homeowners jump the gun and begin opening credit lines at furniture or home furnishing stores in anticipation of purchasing a house, but it’s best to hold off until you have closed on your mortgage.