There are four steps to getting ready to finance your home. Doing these steps before you go out shopping for your new home will make it easier to make the purchase and save money on your mortgage.
Clean up your credit report - Some studies say that over 50% of credit reports have errors on them. Read through your report in detail. If something is wrong, you can dispute it. If there is very old information, you can request that the company remove it. If there are credit inquiries on your account, you can request that they be removed as well.
Reduce your debt-to-income ratio- Showing a solid debt to income ratio will set lender’s minds at ease. Pay off credit cards, make arrangements on student loans, and try to pay off everything that you can. This might take some time, but in a year or so your credit report will show that you paid most of your debt off.
Save money for a down payment - Having a large down payment is a great way to ensure that you get a great loan at a great rate. Save as much money as you can toward your down payment. You can make a bit of money by putting it away in a CD (certificate of deposit).
Get pre-approved - One of the best ways to get the best price on your home is to have the money in hand. Pre-approval allows you to shop with a mortgage all ready to go. When you start looking, you’ll know how much house you can afford and will be able to negotiate more easily.