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How to Prepare Your Credit for a Mortgage Loan in 2013


If you want to buy a home in 2013, now's the time to begin preparing for perhaps the most cumbersome of all loan types.

And when those credit cards do get paid off, they'll need to be shelved during the underwriting process. This will ensure the highest possible FICO scores for a slightly blemished credit report, which should lead to very attractive terms for the new loan.

Shelve Credit Usage for 45 Days

Once you pay off the cards, leave them unused for at least 45 days before you apply. This will ensure the balances on your credit reports will be $0. Sometimes it can take a full billing cycle to update accounts on credit reports.

Paying the cards off 45 days in advance is plenty of lead-time. You can continue to use your debit, prepaid debit, or gift cards because those don't show up on your credit reports.

After you've applied for the loan (have fun filling out all that paperwork!) you'll want to make sure your credit reports don't go through any significant changes while the loan is being underwritten.

Now That You've Been Approved….

Just because you've been approved for a loan doesn't mean you're out of the woods yet.

It's possible that your credit reports and scores will be pulled again just before your closing date. The purpose is to make sure that nothing has happened with your credit and debt that could cause the lender to change their minds.

Don't apply for any new credit until AFTER your loan has closed. And, if you want to charge stuff like expensive furniture or a new TV for your new home's basement, again, wait until the loan has closed.

Taking on new debt can lower your scores and will definitely change your debt-to-income ratios for the worse.

Editor's Note: This article by John Ulzheimer was originally published on MintLife.

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