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Renting - it can be frustrating and expensive. Many people pay hundreds of dollars (or more) every month to rent apartments, condos, and homes that they will never own. You can use the money that you are paying your landlord each month, however, to make payments toward your own home. Qualifying is easier than ever before, and the housing market is ripe with bargains.
Check Your Own Credit
Before beginning your journey toward receiving your home loan, do your homework. You will want to make sure that you credit score is at its optimal level by pulling your credit report and score from all three major reporting bureaus. Look for errors on your report, including the dates of any late payments and accounts that do not belong to you. If you are married, have your spouse do the same. Report discrepancies promptly to get them resolved before you apply for your home loan. Make a notation of the reason why any payment was sent in late if there were extenuating circumstances, such as injury or illness. This will not remove an item, but your notation will be there for potential home loan lenders to read.
Open Bank Accounts
If you do not already have them - open up both a checking account and a saving account. Keep your check book balanced to avoid overdrawing your account, and if possible have your paycheck direct deposited into it. Add to your savings account at least weekly - even if it is just small amounts. Having these accounts show your potential home loan lender that you can organize and manage money.
Pay Down Debt
Pay down your existing debt as much as possible, without closing any accounts. Potential home loan lenders will look at what is known as your credit to debt ratio - how much credit is available to you versus how much credit you have used.
Avoid Multiple Inquiries Into Your Credit
For at least two months before applying for your home loan, do not apply for any type of new credit. This includes credit from department stores, credit cards, or other loans. If you are a student, avoid taking out any additional student loans unless absolutely necessary. Inquiries into your credit and an excessive number of open accounts bear negatively on a decision from your lender about your creditworthiness.
Save as much as you can towards a down payment for your new home loan. Home loan lenders see your willingness to pay down on your new home as a sign of your future responsibility that would be shown in repaying your home loan. In fact, some home loan lenders will require you to pay up to ten percent of the purchase price of your home loan as a down payment. On a starter home that you buy for $50,000, you will need a down payment of $5,000. That is not to say that some lenders will not finance you without money down - but having a down payment is a great way to improve your chances.
There are many fine online lenders who write home loans for those just breaking into homeownership. Online lenders have set up easy to use websites that make applying for your home loan a breeze.