It offers some helpful advice on how to be prepared to own a home with the new loan requirements.
CHICAGO--(BUSINESS WIRE)--Many Americans hope to purchase a home and pursue the "American Dream." Everyone should understand: lending practices are changing as we speak and tighter qualification requirements will make strong credit even more important than in past years. In today's market, you can no longer count on non-traditional products like interest-only mortgages, adjustable rate mortgages, stated income or no-doc loans to help you enter the housing market.
Here are some suggestions to prepare your credit and your budget for a strong dose of reality with new lending practices:
- Get copies of all three credit reports and pay for your credit scores. Inaccurate items on your credit report can sabotage your chances of securing good financing. Request copies of all three credit bureau reports free from www.annualcreditreport.com and purchase your credit scores. Dispute inaccuracies and if you're credit score isn't at or near 700, postpone your home purchase to allow time to improve your credit score.
- Understand the real cost of home ownership and never let someone tell you what you can afford. You will have many unexpected housing expenses when moving into your first home - maintenance, decorating, increased utilities and more. Review your household spending plan early to determine how much you can afford in monthly mortgage payments and be sure to factor in increased household spending.
- Reduce your debt to income ratio. There are only two ways to accomplish this: increase your income or decrease your debts. If you need help creating a debt repayment plan, Family Credit Counseling Service provides helpful debt and budgeting calculators on their website www.familycredit.org.
- Assume you'll need a good down payment. Don't jeopardize your budget or tap out your emergency fund in order to scrape together enough for your down payment; wait to purchase until you can comfortably cover a significant down payment.