Things You'll Need
If you do not have a copy of your recent credit report, you will need to order a copy from at least one of the major credit bureaus.Pay the service fee to request your credit score at the time you place your order. Credit reports and scores can be ordered online or through the mail.
Review your credit report and score to see where you stand. Also review your current income amount as well as the total amount of your monthly expenses. List your figures in your notebook. List any savings account balance you have that can be put toward a down payment.
After analyzing your financial situation, understand that your bad credit rating will cost you more money than if your credit was satisfactory, if in fact you can even find a lender to work with you. Your focus should be on improving your credit score for at least six months to a year before applying for a loan. Apply for a secured credit card, pay off debts, maintain steady job status and make all of your monthly payments on time to increase your credit score. During this time, begin saving a down payment amount of at least 10 percent of the total price of the home.
After working to improve credit for six months to 12 months, reorder a copy of your credit report and score for review. A credit score of 720 or higher will
help keep interest charges low. If you have achieved an improved credit score and are ready to move on, proceed to the next step. If your score has not show remarkable improvement, continue working on the improving your credit score.
Browse through several real estate listings to find an average price for the kind of home you are interested in buying. Find a mortgage calculator online. Using your income/debt figures and your savings information, calculate the approximate monthly payment on the type of home you priced. The mortgage calculator will tally an estimated amount. Compare that total with your income/debt totals to decipher is the home price is affordable.
Once you have found a home you can afford, you can begin gathering information on lenders that provide home financing. Use the Internet or referrals to find a reputable lender. Contact several lenders and discuss your financial situation. You may also opt to schedule an appointment at your local bank or credit union if you have a lengthy history with them.
If the lender provides you with direction or advice as to improving your chances for an affordable mortgage, follow its instructions to improve your chance for loan qualification.
If you have been approved for an affordable loan, ask the lender to provide you with a preapproval letter that indicates the amount of the loan for which you qualified. This is will assist real-estate agents in finding you a home in your price range.