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Credit For Home Purchase

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Why? Because the way you handle credit cards has a large influence on your FICO scores. And your FICO scores are one of the three most important determining factors when you apply for a home mortgage.

Monthly income and the stability of your employment are the other two factors.

If you're thinking of a home purchase, now is the time to get a copy of your credit report and check your scores. Even if you pay all of your bills on time, the way you handle credit cards could be pulling your FICO scores down, and if that's the case, you need to take some steps.

First, check your current card balances against your credit lines. If your balances are over 30% of the credit line on any one card, they are pulling your scores down. To correct this, you can do one of three things:

1. Ask your credit card issuers for a credit line increase - but don't use it

2. Move your balances between cards so that each shows less than 30% of the available credit.

3. Choose and apply for a new credit card, then don't use it except to transfer balances.

It seems silly that you can owe the same amount of money and move it around to increase your credit scores, but that's the formula.

Misinformation to disregard:

When mortgage lenders attempt to counsel their customers on how to raise credit scores, some of them make a big mistake. While they are correct in telling customers to pay down debt, some also counsel people to close unused credit card accounts. This is a bad idea and will actually lower your scores.

The FICO formula wants to see that you are using only a small portion of the credit available to you. If you close an account you reduce that available credit.

Also, as nice as it is to pay less interest, it is a bad idea to move all of your debt to one card with lower interest - unless you can move it and still remain under 30% of your available credit on that card.

Of course you should pay every credit card billing on or before the due date - and if you pay on line, be sure you pay by the correct time of day if you pay on the due date. Payments made after a set time of day are posted the following day and will trigger both a late charge and a late notice on your credit report.

Credit For Home Purchase

If you are currently in pre-foreclosure or have already been issued NOD (notice of default) you are no doubt stressed, overwhelmed and even angry. You must put those feelings aside and deal with reality now, as TIME is your worst enemy. There are effective ways to stop foreclosure.

You must determine very quickly (hopefully within 30 days) if you are experiencing only a temporary cash flow issue and will be able to continue making payments.

Retention Strategies - These help you keep your home. You need to contact the loss mitigation department of your lender ASAP. You will need to know what types of loan modification or reinstatement options are available to you.

Sell The Home - If you honestly believe your cash flow situation will not improve you will have no option other than a liquidation strategy - selling the house. If you have some equity in the home this may be the best option for you to stop foreclosure.

Remember "best" actually means least damaging to your finances, family and personal well-being. Selling your home may salvage what's left of your credit score and you'll walk away with some cash as well as stop foreclosure on your property. You also will be in better shape to apply for a mortgage in the future. This is the least damaging option.

Of course the quick sale contract will typically cover the amount of the payoff plus whatever is negotiated with the foreclosure investor. They'll want to purchase your home for under market value so be prepared. Remember, time is your enemy so selling low believe it or not, creates a win-win for you and the foreclosure investor. It's wise to accept a reasonable offer and move on. The benefit here is you stop foreclosure and will be assured some exit cash.

Short sale - If you have no equity and actually owe more than the home is worth, a short sale may be an option. The lender will accept a settlement for less than the payoff and the foreclosure process stops. Your troubles are not over however - you will still have a tax consequence because the IRS views the amount "forgiven" as a taxable event. For example if the payoff is $260,000 and the lender accepts $240,000 - you will be taxed on the $20G. Plus your credit score will be further damaged. This will stop foreclosure but with negative consequences.

Deed in lieu of foreclosure - If you can't sell the house for enough to cover the payoff your lender may agree to accept a deed in lieu of foreclosure. You merely turn over title of the home to the lender. This is a viable way to stop foreclosure. You must first prove unavoidable hardship to even be considered for this.

Proceed with foreclosure - The worst situation would be to let the foreclosure proceed. You will completely decimate your credit as well as lose your home.

As devastating as foreclosure is you can bounce back - the damage need not be permanent. There are steps you can take to stop foreclosure or if it's too late, rebuild your credit slowly but surely and qualify for home ownership after foreclosure.

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About Author

Both James Exum & Alyssa Collins are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.

James Exum has sinced written about articles on various topics from Credit Cards, Gas Prices and Credit Cards. BestRateForCreditCards.com is your on-line resource for comparsions. James Exum's top article generates over 8100 views. to your Favourites.

Alyssa Collins has sinced written about articles on various topics from Food And Drink, Credit Cards and Mortgage. Learn how you can stop foreclosure - guaranteed: . Alyssa Collins's top article generates over 14800 views. to your Favourites.

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