School of Hard Knocks You Gotta
Apart from a steady income and money for a down payment, a lender
will expect you to have a good credit history to qualify for a loan. The big factors
are how much debt, and whether you pay your bills on time. Although most homebuyers
are approved for a loan, for others, qualifying means taking a lesson from the
"school of hard knocks," financially speaking.
Do You Make the Grade?
After receiving your credit report, a lender will typically assign
a credit rating between an 'A' and a 'D.' If you hated getting a 'D' in school,
just wait till you see what it does to the cost of your home loan. Fortunately,
you're not stuck with a poor grade forever--homebuyers with a spotty financial
history can generally rehabilitate their credit in a year or two.
You Juggle Your Credit Cards?
Most mortgage companies expect the average
person to have some credit card debt. No harm in that, as long as you pay your
bills on time, right? WRONG, it's a major warning sign if your cards are pushed
to their limits, especially if you have little or no cash in the bank.
What if You Don't HAVE a Credit History?
you're at the other end of the spectrum. You don't use credit cards, or don't
take out loans, so there's nothing to report on your credit report! What's your
grade? Don't worry, you can still document your rent, telephone bills, or utility
payments. If you pay those bills on time, that's something a lender has to consider.
Raising Your Grades
That's just a little homework to prepare
for the School of Financial Hard Knocks. Now how do you raise your grades and
improve your chances of getting a decent loan?
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