If a buyer is interested in buying a home, they should start the process 6-9 months before the purchase. It should begin with checking their credit. If any issues are found, they can work on that immediately. However, it takes several credit cycles (every 30 days) for the credit report to update. Credit is one of the 3 C's (credit, capacity, collateral) needed with buying a home and it is very important. Having a good to excellent credit score will determine how much you will pay to borrow money-essentially your interest rate.
When reviewing their credit reports, they should be looking for errors, judgments, and late payments. They can correct errors by contacting the credit reporting agencies to dispute them. If they have judgments, they can contact the creditor to decide to settle the account as well as late payments. Some creditors are willing, if you are currently up to date, to remove late payment history. It's very important to do any disputes 9-12 months before applying for a mortgage. It takes time for credit reporting agencies to remove them.
1. Always pay on time.
2. Keep your credit owed within limits. (less than 30% of total available credit)
3. Use two credit cards if you are a definite credit card spender. If you have two credit cards, you can keep your usage percentage in control.
4. Pay high-interest loans and small loans first.
5.. Negotiate if you cannot pay on time.
At the same time buyers should stop adding on anymore debt. If you want to borrow money, you cannot owe several other creditors money.
Within 2-3 months buyer's should get organized, Here is a generic checklist of documents that they should put together ahead of time.
1. Two forms of identification including a government photo ID.
2. Pay stubs for the past 30 days including year-to-date income.
3. Your most recent year's W2 form and/or most recent 1099 form.
4. Two years of your most recent signed tax return, including all schedules and all pages.
5. All pages of your most recent bank statements, including back up docs for all large deposits.
6. Gift letter if gift money is to be used.
7. All pages of any court order child support or divorce decree.
There is nothing better than working with buyers who are prepared, ready, and organized to begin the process. Hopefully, this post will help streamline the process for your buyers and make for a smooth transaction for everyone else involved.