Steps to Take When Buying a Home

Posted by: Henry B. | Dec 21,2007


Everyone here at EoC will recommend that you order up a copy of your credit report from all three bureaus.  Free credit report (singular) is actually a misnomer, as you will order up copies from each major credit bureau – Experian, Equifax, and TransUnion.  To effectively understand your entire credit history, and refute any inaccuracies, you need to look at each credit report, not just one from one bureau.  There may be an outdated listing, or fraudulent listing, on one bureaus report but not another.  Before purchasing a home, you must order up copies of your credit report.  Be sure to do this at least three months in advance, if not six months, so that you can erase any disputes.  

Sometimes you don’t even need to read your credit report to know that you are not the most attractive buyer for a home.  All you have to do is look at your credit card bill.  There are certain types of loans that are less attractive to lenders.  A lender will not look nearly as negatively upon low-interest student loan debt.  Credit card debt, however, is another matter.  If you have $8000 or more in average-interest credit card debt, this is going to hurt your chances at getting a mortgage with good rates.  

So before you even think about getting a copy of your credit report, your first goal should be to wipe your credit card bill clean.  What lender is going to want to offer a low-interest loan to someone who is already facing a high debt burden.  Even if you have been 100% responsible with paying your bills on time – and even above the minimum – you still owe a lot of money and a new mortgage is just going to increase your burden, no matter how responsible you’ve been.  

Most new homeowners look to shelling out a lot of money for the down payment.  I would recommend using some of that down payment to pay off your outstanding debts.  Low-interest debt you can leave alone, though obviously it won’t hurt to pay this off as well.  But high-interest debt such as a credit card debt should be wiped clean before you enter the bargaining table.  

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