Depending on how far out you want to buy you can do some things yourself to clean up your credit a bit. You may not want to wait for a year to pass if you had late payments recently.. check with a mortgage broker (or three) to see what you can qualify for now. Ask about FHA loans - you can put less $ down for them.
If your rating is below 650 or 600ish you may have some trouble getting a loan.
Remember that your interest rate can have a HUGE affect on how much you end up paying for a home over the years - by tens of thousands or more - so I'd recommend doing what you can to improve your rating, especially if you plan to keep the home for a while.
here is an excerpt from an eBook I'm writing for my website -
Improve Your Credit Score
Your credit scores, along with your overall income and debt, are a big factor in determining whether youâ€™ll qualify for a loan and what your loan terms will be. You want to do what you can to improve and maintain your credit score before you apply for a loan.
Pay all of your bills on time for at least year. Many companies let you set up automatic payments, which is a great way to make sure you never forget to mail a check!
Check your credit reports for errors â€“ if you find any get them fixed. Mistakes happen, and you could be paying for someone elseâ€™s poor financial management. Each of the three major credit reporting companies has to give you a free credit report every year if you ask for it. They have set up a central website to handle the requests â€“ visit http://www.annualcreditreport.com
and check on your credit info every year.
Credit cards and how you manage them have a huge affect on your credit score. Transferring credit card debt from one card to another could lower your score. Donâ€™t open new credit card accounts because having too much available credit can lower your score. If you have extra accounts that you donâ€™t use consider closing some of them.
Manage your accounts. Your score will usually be higher if you have a couple different types of credit, but make sure none of them are charged to the limit. If you owe a lot of money on many different accounts it can indicate that you are overextended. However, itâ€™s a good thing if you have a good proportion of balances to total credit limits. Also, the longer you have had your accounts open, the better. If there is an account you are ready to pay off consider keeping it open and using it once in a while rather than closing it when you make your final payment. Avoid finance companies - even if you pay the loan on time, the interest is high and it can be considered a sign of poor credit management.
Too many credit reports being requested can lower your score, so try to shop for mortgage rates all at once. Multiple inquiries from the same type of lender are counted as one inquiry if they all come in over a short period of time â€“ like a week or two.
If you have had credit problems like missed payments, judgments, etc., wait 12 months to apply for a mortgage. Youâ€™re penalized less for problems that happened over a year ago if you have had a good payment record since then.
Finally, donâ€™t order items for your new home on credit â€” such as appliances and furniture â€” until after the loan is approved. The amounts will add to your total debt and you could be surprised on the day of closing to find out you no longer qualify for your loan!