Preparing Your Credit For Home Ownership

I think the most common goal for most people I work with is home ownership, This is usually when most people become conscious of their financial habits and are eager to get it together. If you're suffering from credit challenges then I recommend 24 months of preparation. Here's what to do:

a. Handle all collection & charged off accounts. These negatives can be the most severe items affecting your credit score. Settling these accounts after verifying the validity is usually the best route to take. Anything that seems unverifiable or inaccurate should be disputed. 

b. Show credit stability. When applying for a mortgage underwriter will thoroughly review your credit report and qualifying based on your readiness to commit to such an investment. Having 3-5 lines of positive revolving credit with VERY low balances is a good way to represent this. Minimal amounts of debt are also important to keep in mind. There shouldn't be any other large commitments unless your income can sustain such. I would pay off my auto loan and reduce my student loan debt as much as possible. 

If you need guaranteed approval secured credit, I have you covered HERE

c.  Student loans. If your student loans have been in shambles, correct those. Contact your servicer, get on a rehabilitation plan, and then begin the process of home ownership at least 24 months after those negative dings. Dwanna Stanley of Keller Williams Realty always advises that potential home buyers get on an income-based repayment plan or consolidate their loans based on the type of mortgage loan they're applying for. If you're unaware of what to do you can always schedule a session with me HERE

d. Be current on all financial obligations. Mortgage underwriters despise late payments. You must be current in order for your score to be it's highest. This is applied to every account - even student loans. 

e. Public Records. Tax liens, bankruptcies, and judgments cannot be ignored. If these are valid reporting items, paying them will definitely help your chances of being approved. Disputing any inaccurate information is also crucial. You can contact the IRS for the removal of a federal tax lien (INFO HERE) or contact your state agency to make a request. Bankruptcies just affect the time period in which you can apply for a mortgage again so I wouldn't focus heavily on attempting to remove it. All judgments should be paid - period. 

There are also other important things you should understand about the homeownership process. You need a bank account, two years of valid tax returns, and consistent cash to cover the expenses. 

If you're in the market for a home, check out these amazing realtors I've had the pleasure of working with:

Atlanta, GA -  Quiana Watson, www.quianawatson.com, 404.983.6380 

Jackson, MS - Dwanna Stanley, www.dwannalstanley.com, 662.466.3701

Tampa, FL - Stara Brown, stara.b@kw.com,  813.551.1653

Atlanta, GA - Brenda Robinson, www.theatlantahomegirl.com, 404.468.0889

Jackson, MS - Zandetta Andrews, www.zandettaandrews.com, 601.906.5348

I hope this is helpful!

- Akira J. Dixon