Credit Prep for Your Home Loan
Having checklists for your loan is a great idea--a list of your required documents and paperwork, things-to-do lists, and organizational tools for other aspects of your loan.
It is also a very good idea to use a checklist or to-do list specifically for getting your credit ready for the new loan.
You will want to start preparing this checklist long before you are ready to fill out paperwork to apply for the mortgage or to get pre-approved. This is a process that should begin, at a minimum, 12 months ahead of your application.
What Should Be on a Home Loan Credit Checklist
What goes on a credit checklist? You’ll want to review your past credit performance, anticipate future credit activity, and you will want to make sure your credit report is free of any identity theft and/or outdated information issues.
- A mortgage loan credit checklist should include the following:
- Requesting copies of your credit reports from all three major credit reporting agencies
- Review your credit reports carefully for evidence of identity theft
- Look at your credit reports for the dates of your last late or missed monthly payments
- Reviewing the reports for erroneous information;
- Review your credit for details that should no longer be on your report
That is so important that it’s worth repeating: NEVER apply for new credit while you have an open home loan application. Your lender will check your credit more than once during the home loan approval process. More than one home loan has been stopped in its tracks because of changes in debt-to-income ratios, a sudden change in credit, etc.
Identity Theft Issues and Your Credit Reports
Why do we suggest you review your credit reports for evidence of identity theft and erroneous information so early in the planning stages? Correcting your report does NOT happen overnight and you will need to build in extra time to address such problems.
Remember that in cases of errors on your report you will need to initiate a dispute with the credit reporting agencies and in cases of identity theft you’ll have to file police reports and other paperwork. You will find this process time-consuming, but definitely worth the effort.
FHA loan rules, lender standards, state law, and federal requirements may all have a say in how such issues are worked out, but in general you should know that a lender will likely require any disputed area of your credit report to be resolved before loan approval can happen.
Learn About the Path to Homeownership
Take the guesswork out of buying and owning a home. Once you know where you want to go, we'll get you there in 9 steps.
Step 1: How Much Can You Afford?
Step 2: Know Your Homebuyer Rights
Step 3: Basic Mortgage Terminology
Step 4: Shopping for a Mortgage
Step 5: Shopping for Your Home
Step 6: Making an Offer to the Seller
Step 7: Getting a Home Inspection
Step 8: Homeowner's Insurance
Step 9: What to Expect at Closing
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