If you are getting ready to buy a house in the next few years, taking time to build your credit is a great way to get the best rates and keep your costs down. Here are a few steps that you can take today to get your credit in the best shape possible. Three Tips for Building Your Credit Make Payments On Time It seems like a simple step but it is one of the most critical to building and maintaining good credit. If you make your payments on time, your lender knows that they are likely to get their monthly mortgage payments on time as well. If you struggle to remember to make your payments, you can always set up an autopay or auto draft with your bank. This makes it easy to keep those payments going where they need to go when they need to go there.   Reduce Debts One of the most important things that you need to consider is your debt-to-income ratio, DTI. Lenders look at this ratio to see how much money you need to pay out monthly to cover your debts compared to how much money you have coming in as income. Debt from credit cards, car loans, student loans, medical debt, and other sources can take up a big portion of your budget. Try to make extra payments whenever possible to get these debts out of your life.   Getting Credit One of the biggest problems that younger home buyers have is that they don’t have a long credit history. While there is no substitute for time, keeping lines of credit open (even if you don’t use them) can show that you have a long history with a certain bank or financial institution. Just be wary of opening new lines of credit that you don’t need. Not only does this make things more complicated, it can also be tempting to spend money and build up debt.  

If you’re getting ready to start house shopping, you’ve probably taken a good look at your budget and wondered how much house you can afford. Maybe you’re asking yourself if you can afford a mortgage at all! There are a few factors to consider when deciding if taking out a mortgage to buy a home is the right step for you. Rent vs. Mortgage Depending on the housing market in your area, it may be cheaper to rent the same size home as it is to buy, or vice versa. This varies by area and can even fluctuate over time in the same area. Working with a real estate agent can help you stay knowledgeable about home trends and what is available.  Extra expenses When buying a home, the purchase price isn’t the only thing that you have to consider when deciding what you can afford. The current interest rate can also have a big impact on your monthly mortgage payment. Insurance costs and taxes are also included in your monthly mortgage payment in most cases. Called PITI (principal, interest, taxes, and insurance), this calculation is done at closing but you should have a good idea of what to expect early in the mortgage process. You will also need some room in your budget to take care of maintenance and repairs. Owning a home often comes with added costs that would be covered by a landlord if you were renting.   Talk to a loan officer to see what you would qualify for but also compare this number against your own budget to decide what is best for you. Keep in mind that you don’t need to buy an expensive house, even if you qualify for it. Spending less can add some room to your budget for fun things like renovations, upgrades, and entertaining in your new home.    

Once you start the homebuying process, it can seem like an endless stream of paperwork to get to closing. Fortunately, there are plenty of people to help keep things clear along the way. Your real estate agent, loan officer, and processor can all explain the steps and required paperwork to go from an accepted offer to getting the keys to your home. Here is a quick guide to some of the documents that you will need for your mortgage application. Information about the home Your loan officer and processor will ask for information about the house that you plan to purchase. This can include things like the purchase offer that outlines the price and conditions. It may also mean that you need to get a survey, home inspection, or appraisal. This depends on the type of loan that you plan to use and what is required by your lender. Your real estate agent can help schedule any special appointments, like a home inspection or appraisal. Your loan officer will often be the one to order these documents and pay for them, although the costs do get included in the final loan. Information about your finances You will be responsible for providing up-to-date information about your finances and ability to pay back the loan. Some things, like your credit score, only require that you authorize your loan officer or processor to get the information from the credit bureau. Other items, like your paystubs, existing loan balances, and credit card balances, will come from you. Your lender will tell you which items that they require. If your finances are complicated, such as multiple sources of income or multiple lines of credit, you might have to provide explanations or additional documents to help the lender get a clear picture of where your money is going.