Guest Post: Maintain Good Credit Before A Home Purchase
This is a guest post from Silicon Valley Blogger of The Digerati Life. The Digerati Life is a site that covers topics on investing, saving and money management. Check out the site’s coverage of OptionsHouse and their review of Zecco, for a taste. But the topic for the day is how to manage your credit after experiencing foreclosure. If you’re interested in providing a guest post, please click here for more information.
We, homeowners, have gone through quite a drubbing during this latest real estate market downturn. The disruptions in this market brought about by the subprime mortgage meltdown haven’t yet dissipated. A number of surveys show that the housing market is recovering at a very slow pace, and lending operations have not yet returned to normal.
From what I’ve noticed, mortgage lenders are still strict about their lending guidelines. If you don’t have an excellent credit score, you can expect your chances for obtaining credit to become much lower, when you try to qualify for a mortgage. Many borrowers are resorting to quick and dirty credit repair programs since lenders have become a lot stricter about approving a mortgage after foreclosure. This is a tough matter to accept for many would-be homeowners, given how easy it used to be to get a personal loan or mortgage in the past. Now after the credit crunch, the American dream of owning a home is becoming much more elusive. But we can reverse these trends if we work on improving our financial health — possibly by getting our credit in tip top shape so that we can become the kind of customers that lenders would love to have (and whose business they’d love to compete for).
So what are some financial strategies we can undertake in order to help us secure better credit? Are there ways to restore our credit so that we can qualify for a mortgage in a time of tighter credit? Here are some ideas!
1) Stay current with your payments.
Stay up to date with your utility bills, credit cards, store cards, medical bills and so on. When you’re making regular and timely payments, these should eventually appear on your credit report as positive marks. When you manage your payments well and attend to your bills responsibly, lenders will realize that you are sincere about your efforts to repay your debt. You should also check your credit score and credit report periodically to see whether there are any discrepancies.
2) Organize and simplify your finances.
Get your finances in order by consolidating your accounts and automating your savings and spending programs. I would suggest investing some money in a budgeting application. There are free sites like Mint.com that can be helpful. Desktop tools like “You Need A Budget” are great too. You can check out our YNAB review for more information on this. With the use of these tools, you can formulate a sensible budget which you should then try to stick with as best as you can. As you work to repair any damaged credit, this will turn out to be a significant step.
3) Save money!
If you intend to buy a house in the near future, you’ll need to get started on your savings right away! Work on building a substantial down payment — the larger this is, the cheaper your loan. When you have the ability to make a large down payment, you’re more likely to receive viable terms on your loan.
4) Monitor the mortgage market rates.
As you work on improving your credit, keep tabs on the existing mortgage market rates. Despite the fact that studies indicate that the real estate market is showing signs of improvement, we still need to keep our eye on property values and loan rates. Why? Because a specific optimistic change in the markets must survive for several months so that it can be proven as a trend. The housing market is currently a buyer’s market, and so at this time, the rates are quite attractive for borrowers. Therefore, if you’re ready to become a homeowner, and you’re approved for a loan or have some money with you, then don’t waste time. Start the home buying procedure right away! Who knows how long mortgage rates can remain so low?
5) Boost your credit score.
Your credit record will speak for yourself if you are disciplined about keeping up with your bill payments. As was mentioned earlier, avoid late or missed payments and you’ll be on your way to a healthier credit score. There are other things you can also do to boost your credit, such as: avoiding hitting and going beyond your credit limit and maintaining a good mix of installment loans to your name.
For those who have suffered a home loss due to foreclosure, don’t lose hope! You still have the opportunity to take out a mortgage after foreclosure even during these lean times. But you’ll need to do what you can to restore your credit prior to making any moves towards financing. Taking care of your finances before making any big purchase will ensure that you get a better deal on any loan that you decide to take out in the future.