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You are very smart to consider your options before you start the process. You don't know how many times people get it backwards. So many people start looking for a house before they even know what (or IF) they can qualify for. Your first step is to find out what kind of shape your credit is in, and then start a plan to restore it to where it needs to be. There are a lot of companies out there that offer a "free" credit report, but all but one of them are not really free. They will try to get you to sign up for a trial credit watch program or the like. There is only one official site where you can get a free tri-merge (all 3 credit bureaus) credit report, and that is http://www.annualcreditreport.com.
The next step is to talk to a professional. I can help you do both. I am a direct lender who specializes in FHA mortgages and I am also certified to do the USDA programs that were spoken of by an earlier poster.
But the first step is your credit. I work with a team of attorneys that eat, drink and sleep credit law. They have been very successful over the past 18 years in removing all types of derogatory credit for my clients credit reports. They serve an average of 15,000 members each year, and raise credit scores and average of 127 points in 6 months or less.
So when you're ready, give me a call. 888-712-1154, my extension is 5.
Here is what we recommend to our clients. We give them the names of several loan originators who we work with regularly. They can pick any of them they would like or another loan company as long as it is a direct lender. Visit with one of the loan officers. They want to make you a loan. That's how they make a living. They can check on your credit issues and give you the best methods to have those issues solved in the shortest time possible. Remember, if they help you to clear up your credit, they also hope that you will return to use them as your loan officer. That way, they have a stake in it too.
As a realtor, I would not advise my clients on how to correct or eliminate their credit problems...as I am not a loan originator and would think that their advice and help would be much more beneficial to you. I just keep my realtor hat on and in the same way, once my client's credit issues have disappeared, and they use the services of the loan originator that helped them, I also hope they will return to use my services as a Realtor since I helped them to get on the right path the fix the credit problems.
Don DeBaer Memphis TN Realtor
If you have credit cards, pay them off one at a time (starting with the card with the least balance) and then don't ease off on the amount you apply toward credit cards every month. Roll over the amount you've been paying on the card that's now paid-off and apply that to the amount you pay every month to the next card to pay off. The important thing is to never be late again making any payments. It may take a few years for your credit to be restored this way, but it will be worth it.
As you pay off your credit cards, do not close the accounts!!! An important factor in determining your credit score is your timely payment of your bills. Closing the account when it is paid off is a negative - not a positive. Just cut up the card and never charge on it again, but do not close the account out!
Another thing to remember is not to make a major purchase right before you are ready to buy. You may need furniture, appliances, etc., for your new home, but purchasing them before you close on your home will only increase the ratio of the amount you owe vs the amount of income you have. "
Be patient. It will happen. You WILL own your own home.
Start by asking the credit bureau if there are any pending collections against you. If there are try to call the collectors and resolve it by either paying them if you owe them or denying wrongdoing and asking it to be removed from your credit, in any case it should take about 3 to 6 months for it to clear. If you have a bankruptcy on your credit the best way to minimize the damage to it is to have a steady paying job and pay your taxes on time. Lenders today will look at the whole picture before making a decision. The good thing on your side is that prices are really low so for first time buyers it is a great time to buy. Contact a reputable mortgage lender and start working with him/her now, they call also help you with suggestions on how to repair your credit and will also give you a time frame of when and if you can get a loan. Good luck.
If you have quite a few credit cards in your name that you are not using anymore, close the ones that you can, especially the zero balance ones that you just have in your name and never used or ones you used for a particular purpose and don't intend to use any longer. The more open lines of credit you have (credit cards) the more unfavorable it looks on your credit score because you have the potential to have as much debt as you have in limits on your credit cards. If you do have cards with balances, work as hard as you can to pay them off or down as much as possible. That goes for any type of credit - car loans, student loans, etc. Just take it one step at a time. The more you get paid off or down, the better your credit score will begin to be. Next, make sure you pay ALL of your bills on time. I can't stress how important that is in your credit score. Lastly, make sure you don't have any more inquiries on your credit until you're ready to purchase a home. The more inquiries you have on your credit the more you get dinged. So when the lady asks you if you want to open a card and save 10%, just say NO!!!!! :) No car changes, no furniture buys with no interest for 12 months, nothing!! Lastly, don't make any major purchases until after you've closed on a home. Having cash in your account is important in getting a mortgage. As far as saving for the expense of buying a home, it is rare that 100% loans are available anymore. Plan to save at least 5% of the price of the home for the down payment. In addition to 5%, you'll have a few other expenses like inspection costs (usually around $300) and closing costs which will be another 2-3% of the price of the home roughly. You'll put earnest money down on a house when you put an offer on it, but it will go towards your total closing costs...that part just gets paid before closing (earnest money is usually 1% of price). Other than that, don't forget to have some money set aside for anything that comes up in the inspection that needs immediate attention or repairs. Your agent will probably advise you to ask for a certain $ amount of repairs to be made before the inspection, but sometimes you don't as much as you need to take care of some of the things requiring attention. Now for a brand new home you may not have repairs, but you have other expenses that existing homes do not like blinds, sometimes refrigerators come with resale but not new, etc. And if you have the means to save even more than all of this so far, save for things like lawn equipment, furniture and appliances you do not already have (like washer/dryers and refrigerators, etc.).Taking these steps should get you well on your way to home ownership!