{"id":4306,"date":"2022-03-08T10:00:38","date_gmt":"2022-03-08T18:00:38","guid":{"rendered":"https:\/\/www.summerhillhomes.com\/blog\/?p=4306"},"modified":"2024-03-05T14:14:41","modified_gmt":"2024-03-05T22:14:41","slug":"getting-your-credit-ready-for-a-mortgage","status":"publish","type":"post","link":"https:\/\/www.summerhillhomes.com\/blog\/2022\/03\/08\/getting-your-credit-ready-for-a-mortgage\/","title":{"rendered":"Getting Your Credit Ready for a Mortgage"},"content":{"rendered":"\n<p>If buying a home is in your future, you need to take a\ncareful look at your finances now \u2013 well before you begin looking at homes.\nLife is full of surprises but you don\u2019t want to find one in your finances!<\/p>\n\n\n\n<p>Don\u2019t leave your ability to qualify for a mortgage to\nchance; putting in the work now can mean big savings when you finally purchase\nyour home. Here\u2019s how you can prepare your credit for a mortgage.<\/p>\n\n\n\n<div style=\"height:20px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h3 class=\"wp-block-heading\">Check your credit<\/h3>\n\n\n\n<p>The first step is checking your credit report and score.\nThere are three main credit bureaus lenders use to review your credit \u2013\nEquifax, TransUnion, and Experian. You\u2019re entitled to a free copy of your\nreport from each company once every 12 months through AnnualCreditReport.com. <\/p>\n\n\n\n<p>Request a report from each bureau; it\u2019s a good idea to also request your FICO score from each one as well (heads up, this may incur an additional fee but it\u2019s a good idea since lenders look at those scores when reviewing your application). Don\u2019t worry if there are some minor differences between reports. Each report is updated on different schedules so the information may not all be the same.<\/p>\n\n\n\n<p>The important thing is checking for the accuracy of the listed debts. If you find any mistakes, notify the credit agency immediately. It can take between 30 and 45 days to complete a credit dispute so you want to make sure you give yourself plenty of time before applying for a loan. <\/p>\n\n\n\n<div style=\"height:20px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h3 class=\"wp-block-heading\">Figure out your debt-to-income ratio<\/h3>\n\n\n\n<p>Your debt-to-income ratio (DTI) is the percentage of your monthly\ndebt payments compared to your monthly gross income (that\u2019s pre-tax income). To\ncalculate your DTI, add up all of your debt payments (this includes rent or\nmortgage payment, student, car, and other loan payments, alimony or child\nsupport payments, credit card payments, and any other debts) and divide the\ntotal by your gross monthly income. Depending on the type of mortgage, lenders\ntypically prefer a DTI that\u2019s no higher than 36% to 43%. <\/p>\n\n\n\n<p>While completely paying them off is ideal, you don\u2019t have to\nwait until you are debt-free before applying for a mortgage. Just make sure you\nget your DTI low enough to be competitive. Can you still qualify for a loan if\nyour DTI is above 43%? It\u2019s possible but you\u2019ll need extenuating circumstances\nlike a high credit score or large cash reserve to make it happen.<\/p>\n\n\n\n<div style=\"height:20px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h3 class=\"wp-block-heading\">Reduce credit card debt<\/h3>\n\n\n\n<p>Credit utilization ratio is one of the biggest influences on\nyour credit score. This ratio is the percentage of how much you owe divided by\nyour credit limit. For example, if you have two credit cards with a $10,000\ncredit limit between them, and a balance of $4,000 on either of the cards, your\ncredit utilization ratio is 40%. It\u2019s commonly recommended to keep your credit\nutilization rate below 30%. You can achieve that by paying down existing debt. <\/p>\n\n\n\n<div style=\"height:20px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h3 class=\"wp-block-heading\">Pay your bills on time<\/h3>\n\n\n\n<p>Your payment history is another important factor in determining your credit score. Late payments can drag down your score and are a red flag for lenders. Do whatever it takes to make on-time payments, especially leading up to applying for a mortgage. Automated electronic payments, calendar alerts, or email reminders are good ways to help keep you on schedule.<\/p>\n\n\n\n<div style=\"height:20px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h3 class=\"wp-block-heading\">Avoid opening new lines of credit<\/h3>\n\n\n\n<p>Stop opening new lines of credit once you\u2019re ready to apply\nfor a mortgage, about six months before or so. Hard credit checks, like those\ndone when applying for loans, can temporarily lower your credit score. These\nnew lines of credit may also make lenders nervous about your ability to manage\nyour debts. It\u2019s best to save any new credit pulls and large purchases until\nafter you\u2019ve closed on your new home.<\/p>\n\n\n\n<p>Doing the work to make sure you put your best credit foot forward is beneficial. Taking these steps today can make a significant difference in the amount and quality of offers you receive, and ultimately the total cost of your mortgage.<\/p>\n\n\n\n<p> SummerHill Homes wants to help ensure a pleasant and smooth lending experience for you. The process begins when you pre-qualify with one of our <a href=\"https:\/\/www.summerhillhomes.com\/buying-your-home#\/preferred-lenders\">preferred home lenders<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>If buying a home is in your future, you need to take a careful look at your finances now \u2013 well before you begin looking at homes. Life is full of surprises but you don\u2019t want to find one in your finances! Don\u2019t leave your ability to qualify for a mortgage to chance; putting in [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":5307,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[453],"tags":[524,486,485,525,196],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v20.6 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Getting Your Credit Ready for a Mortgage - SummerHill Homes Blog<\/title>\n<meta name=\"description\" content=\"Getting your credit ready for a mortgage is crucial. 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