If you are planning on purchasing your first home or a new home, it is always best that you begin to prepare your credit preparation three months in advance. Your first step, in preparing your credit, is to make sure that your credit history is accurately reported.

It is important to make sure that what your credit report reveals is correct. If you see something that is inaccurate, you should contact the credit reporting agency immediately. By doing this, you can easily improve your credit score. Do not be fooled by a company that offers to remove a negative from your credit report for a large fee. There is no way to remove accurate information that is on your credit report. You can only dispute inaccuracies.

Credit Repair

After you have gone through your credit report, you may find out that there are certain actions you can take to improve your credit score. You may be able to pay unpaid collections, charge offs, or judgments. This will help you to receive a higher score, which may be a deciding factor in obtaining a home loan.

Another beneficial action for your credit score is to pay off all of your major credit cards and department store cards. You do not have to close the accounts, but if the accounts are paid in full, it will look good on your credit report.

If you have established credit and are in the market for a home loan, do not open any new accounts. Each time you apply for credit, an inquiry is placed in your credit report, which lowers your credit score. By keeping in mind these there actions, you can help to improve your credit score.

Funds to Close

The money that a home buyer plans to use for the down payment and closing costs typically has to be seasoned and sourced for ninety days. You should consider putting the money for your down payment in an institution, such as a bank, CD, or a 401k.

If you have ten thousand dollars under your mattress, you will be turned down. A lender must be able to see that you have had the money for a period of at least three months. Put the money for your down payment and the closing costs in the bank immediately to ensure loan approval.

When Paying Rent or Your Mortgage

When you are applying for a home loan, it is always beneficial to pay your rent or mortgage by check. A check is proof that you paid the rent or mortgage on time. There are some loan programs that will require the past twelve cancelled checks, or even an entire years worth of cancelled checks. To make sure this is not an issue, always pay your rent and mortgage on time by check. It is also a good idea to pay off any small bills that you have accumulated.

Make Sure to Collect Your Documents

It is important to have the following documents on hand: the last two years tax returns or W2's, one full month of paycheck stubs from your job, three consecutive bank statements, divorce papers, bankruptcy papers and twelve months of cancelled checks. The documentation requirements may differ from one lending institution to another. It all depends on the type of loan for which you are applying. Make sure to have all of these documents ready.