We are planning to buy our first home, how to keep the scores high ( Shall I pay all credit card payments in advance ?), and how to approach the lenders, any tips appreciated.
It really depends on what type of loan/term you are looking for. Overall, you will get the best rate/terms with a 720+ score with full income documentation, 80% or less loan to value. That is not to say that if you don' have perfert credit or need 100% financing that you are blown out of the water. NOT!!! There are loans out there for 500 scores...560 can get 100% financing. What are your scores now? Are you self employed? Do you have the cash to pay off your credit cards or should you be using the $$ for a down payment? If you want to pay them down its best to stay at 50% or below. Don't pay them off entirely. Best thing you can do with your Broker/Agent is to tell them everything up front, disclose everything so there are no surprises. Tell them what you want...how long do you plan on being in this home? If you only plan to be in it 3-5 years, why pay a 30 year rate? Would you like to keep your payments to a minimum now...get an interest only loan. Do you want to keep as much cash on hand? Get a 80% first and a 10 or 20% second/HELOC. Let them know you are in the drivers seat! Good luck..don't wait, buy a home while rates are low!!!
Paying down balances can take months to show up on your CR and FICO. In my case, DMB takes up to three months. Very, very frustrating. If you haven't done so, pull your scores using myFICO.com - discount code of "unionplus" gets you a bit of a discount. There may be better, newer codes, search for "myfico promo code discount" and see what's around here. Download PDF Creator (google it), pick the "printable format" option on your report and "print" your reports to a PDF file. That way you have them in a format you can print or email to potential lendors/brokers. Use these scores as a starting point. Let them tell you about problems and pluses they see in your report. If they will only talk about what they can pull, move on to another broker. You don't want to pull your report until you're ready, there's a 30 day window where all mtg related pulls count as "one" pull. Find out what your options are based on your scores and history today. You may have some COs or liens and they need to be documented as paid or satisfied. Go over your income, debt ratio and figure out your best strategy. I went NUTS getting my score up after I paid balances on my cards and it was for nothing. In my case, 680 was all I needed. This is a great time to borrow, maybe the best for a long time. I had my lender pick up the closing costs and my broker kicked me 1% back, so I was in great shape on closing day. Probably not your issue, but the magic date for Ch7 BK is two years from discharge. I closed two weeks after my 2 year anniversary.
i agree with pulling your credit and scores (from myfico). that will give you some ideas as to what you need to pay or fix. then sit down and figure out how much monthly payment you can afford (take net income, subtract bills and living expenses and savings). that will help in figuring out down the road how much to buy. while i agree there is a mortgage out there for everyone, you get a much better rate the better your score is.
