Love Shack 101 – 5 Tips for Newlywed House Hunters
Love is blind but mortgage companies surely are not. This fact of life is one many newlyweds encounter when hunting for their first home and discover their cumulative credit is far from lovable. So what happens to their “American Dream” when one spouse’s credit is terrific but the other’s isn’t?
Typically when a couple applies for a mortgage, the lender reviews the credit histories of both individuals That means the negative credit history of one could have an effect on the transaction. Lenders tend to look at each situation pragmatically. If the person with bad credit is not needed to qualify for a mortgage—in other words, one partner has sufficient income to obtain a mortgage—then the credit report of the individual with less-than-stellar credit history might not be reviewed.
Your best move is to plan ahead. Just as finalizing the plans for a wedding can take up to a year, so can efforts to improve your credit history. A couple should spend time improving their credit history, paying off debts and building a good credit history. The longer the time has passed since the negative activity, the better off you’ll be when applying for a loan. You need to show a lender you’ve changed your habits and can now handle your financial affairs more carefully It comes down to paying bills on time, particularly rent and car payments. Most lenders look for a year’s worth of acceptable credit. The sooner the person can act, the better.
These five tips can place you and your companion in a better position to qualify for a mortgage
Gather copies of your credit reports several weeks or even months before you apply for a loan. This makes you aware of any potential problems that the lender will see. This way you and your lender are on the same page and there are no surprises.
Change your Habits
In the event you have spotty credit history, begin paying your bills on time, or even early f you can. The mortgage companies want to see that your are responsible and can pay your bills on time. This will help them see that you can handle monthly expenses.
Establish a Credit History
If you lack credit history, a cosigner for a loan is one way to establish a credit record. A secured credit card can also be helpful. Be sure the credit card company reports your payment history to credit reporting agencies.
Consider Applying as a Sole Applicant
If one of the partners credit history is less than desirable, use only the credit history of the partner with good credit, if possible.
Look at Alternatives
Someone with impaired credit could qualify for a non-conventional mortgage, such as a sub-prime loan, which is more expensive because there’s more risk to the lender. If mortgage rates are 7%, a couple with bad credit would have to pay 9% for a sub-prime loan.
Above all, don’t wait until it’s too late. Buying a home is a little like getting married: the process is arduous but the result is worth it
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