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- Credit issues: Many consumers may have bad credit and not even realize it due to errors on their credit report. It’s vital to get a copy of your credit report and to go over it carefully, ensuring that any errors found are reported and fixed. If your credit report does not contain any errors but your score is low, it’s a good idea to work to improve your credit score before applying for a loan.
- Debt: Even with a good credit score, lenders see excessive debt as a red flag. If you have high credit card balances, pay those down before applying for a loan. It would also be beneficial to pay down car loans and student loans as well before going through the mortgage process. The less debt a consumer has, the better they look to a lender.
- Credit cards: In order to maintain good credit, experts recommend using less than 20% of your available credit. When possible, use cash for large purchases instead of relying on your credit cards.
- Be truthful on applications: Don’t be tempted to factor in bonuses or overtime compensation you have not gotten yet into your annual income on applications. Lenders will ask for documentation of any additional income, as well as bonuses, so do not list anything that you have not received.
- Be upfront: Financial issues from the past will be discovered by the bank, so it is best to be truthful from the start and disclose your financial history.
- Make a large down payment: If possible, put down a substantial amount towards your home purchase. This act will be looked upon favorably by the bank and you will also have a lower monthly payment and will save on interest fees.