Buying a home can be a very exciting time. Getting started can also feel overwhelming. Can I even qualify for a loan? How much should I have in savings? I wonder what my credit score is now? These are all legitimate questions a potential home buyer has, even if this is not your first home purchase. Understanding the loan process, how to qualify and how your credit can affect the loan program, is a necessary first step.

The first step in buying a home can be to contact either a real estate agent or a lender. If you do not have a relationship with your bank or a lender, your agent can certainly recommend a few for you to speak with.

Getting a home loan starts with a pre-qualification conversation. At this time, the mortgage broker will review your situation, income, debt and credit score. All these make up your ability to get a good mortgage loan and rate. If your credit score is not quite what it needs to be don’t panic, this happens all the time and there are simple things you can do to help boost your score.

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Check For Errors

First thing to do is check your credit report for mistakes. You might see old auto loans or credit cards which are paid off or closed, but still show a balance. You might find collections that are not yours. You might also see high balances due to the time of the month that the report was run. These are issues which can be corrected through the credit bureaus.

Pay Down Credit Card Debt

This is one of the easiest ways to boost your score. Credit card and revolving debt is a large part of your credit score. It’s important to keep the balance below 50% of the available credit. This shows the bureaus that you can manage debt. Any higher and it appears that you rely too heavily on credit.

Remove Negative Accounts

Old collections or bad debt might still appear on your report. Sometimes a creditor will take a portion of the debt and remove the trade line altogether. Negotiate with the creditor and offer to pay some or all of the debt in exchange for the removal of the report. A word of caution, do not pay an old collection account unless they agree, in writing, to remove the account completely. It might seem good to pay off an old bad debt, but it could actually hurt your score. It’s best to talk with your lender about these accounts.

Keep Old Accounts Open

Again, it might seem like closing old accounts that you either don’t use or have a small balance is a good thing. No it’s not! The length of credit accounts for about 15% of your score. Keep those accounts open and giving you good reviews.

Pay On Time

Always pay on time! Any 30 day late can cost you thousands of dollars over the life of a mortgage in extra interest.

Consider a Bankruptcy

If you are in over your head, you might need to step back and set yourself up for a future purchase. A bankruptcy might sound extreme, and it is, but if you have so much debt that it’s making it impossible to move forward with a home purchase, then consider that route. Your credit will recover much faster than you think and in a couple years you’ll be ready to start again.

Obtaining a loan revolves around your income, your debt and your credit. Talk with your lender about your financial situation and determine the best option for you. They can help you with tools to see how you can bump your score very quickly and a small delay can make a difference in the loan and your buying power.