Credit Concerns

• Begin preparing for your purchase even before you actually decide to buy a home. Review your credit history. Clear up any defaults and past due payments. Make efforts to correct any inaccuracies in your credit report. Minimize your inquiries and focus on paying your accounts on time. Most banking institutions and mortgage lenders require a debt to income ratio of 28% or lower. Focus on meeting this requirement by reducing expenses, improving income and eliminating debt. Speak with a debt counselor if you need assistance. There are many federally funded programs that assist individuals in purchasing a home. The services are free of charge.
  
  

Down Payment and Costs

• Prepare for your down payment and fee requirements. Save up enough money to cover your potential down payment, closing costs and moving expenses. Most conventional lending programs require a minimum of 20% down payment toward your purchase. Some programs, however, require anywhere from zero to three percent down payment. Research your lending options while saving your down payment and investigating your program options. Consider the available interest rates and purchase programs that the lender has available. Consider the lender's financial stability and history. Steer clear of scams and subprime lenders that charge excessive fees. There are legitimate mortgage lenders and banking institutions for people with all types of credit and circumstances.
  
  

Credit History and Pre-approval

• Your selected mortgage lender will review your credit history, as well as your income. Most lenders want to see at least two years of steady job history, preferably with the same employer. The lender will request copies of your filed tax returns for the past two to three years. If you find that you are unable to provide at least two years of solid stability, it may not be the time for you to purchase. Income stability shows that you are able to pay a regular monthly mortgage. Gather your documentation. Outside of income, you may also be required to show proof of past residency and explain any conflicting information that may appear on your credit report.
  
  Once you have gathered your information and prepared to begin your purchase process, obtain a pre-approval from your selected lender. A pre-approval will let you know exactly how much home you can afford by purchase amount. The pre-approval also provides you with the monthly mortgage amount based on the purchase amount, the applicable interest rate and terms.