| The Homeowner Affordability and Stability Plan | | | | facing foreclosure could have qualified for a more |
| recently initiated under the Obama administration will | | | | stable and affordable loan program had they taken the |
| provide millions of people with the opportunity to obtain | | | | time to get better prepared ahead of time. |
| financing which will allow them to keep their homes. | | | | |
| For people currently behind on their mortgage | | | | 4. Paying off old collections and charge offs |
| payments, there are provisions in the plan that are | | | | Many people who have re-established their credit |
| designed to help many who are already in or | | | | often have some old bad debt (2-5 years old) that still |
| potentially face the threat of foreclosure. However, | | | | shows up on their credit report. In most cases, paying |
| just applying for a special home loan program doesn't | | | | off an old bad debt is a bad idea. It causes the |
| necessarily mean you'll automatically be approved. | | | | account to reset and become current which more |
| Regardless of which types of loan programs you may | | | | adversely affects your credit score. For |
| be eligible for, it's important to know what not to do | | | | homeowners who obtained a subprime loan, you'll |
| before beginning the process of applying for a | | | | want to learn how to effectively manage your credit |
| mortgage. In order to significantly increase your | | | | well in advance of applying for a home loan to qualify |
| chances of qualifying for a lower interest rate and | | | | for financing. If you're looking to purchase a home in |
| more favorable loan terms, you'll want to avoid making | | | | the future, start educating yourself about what is |
| the following 5 most common blunders: | | | | required to obtain financing at least a year before you |
| 1. Running up credit card balances | | | | need a loan. |
| Having a lot of debt increases your debt to income | | | | |
| ratio. This is a key factor that lenders use to determine | | | | 5. Signing up with credit counseling agencies |
| how much debt you can comfortably manage. Before | | | | Many debt management services advise people to do |
| you apply for a home loan, make sure that your credit | | | | just the opposite of what they should do in order to |
| card balances are low. Refrain from using your credit | | | | qualify for home financing such as closing out accounts |
| to make purchases if you need to acquire a home | | | | in good standing. But these actions often cause their |
| loan. If your credit card balances are already high, start | | | | clients credit scores to decline. Since having a higher |
| paying down the balances and keep them low. | | | | credit score is very important, especially in today's |
| | | | | market, you want to make sure not to engage in |
| 2. Financing major purchases before applying for | | | | practices that will bring your score down. Also, many |
| a home loan | | | | lenders don't look favorably at borrowers who have |
| Countless people inevitably ‘kill the deal' by | | | | signed up with these services. It says that you are |
| purchasing a car or taking out a big loan from a | | | | having trouble managing your finances which is a red |
| finance company or their credit union right before they | | | | flag to lenders. If you're tempted to use your credit |
| apply for a home loan. Similar to running up credit card | | | | cards, a better strategy would be to cut them up and |
| debt, this additional debt can make the difference | | | | pay down your balances so that you incur low or no |
| between getting approved or denied. If at all possible, | | | | monthly charges, but keep your accounts open and |
| wait until after your home loan has funded before | | | | continue to make timely payments if any. |
| financing other purchases. Believe it or not, many | | | | Keep in mind that some credit card companies are |
| lenders will run your credit again even after they have | | | | closing out accounts that have been inactive over a |
| approved your loan to find out if you have since | | | | long period of time. You can always order a |
| applied for more credit. If you are purchasing a home, | | | | replacement card later after you have secured your |
| you will want to wait until the day that your loan has | | | | home loan and payoff minimal charges that you make |
| actually closed. If you are refinancing a primary | | | | in full each month to keep preferred accounts open |
| residence, there is a 3-day rescission (cancellation) | | | | and active. |
| period, even after you have signed the loan papers | | | | (Please note that in certain circumstances, you may be |
| before your loan has funded. | | | | required to register in a HUD-certified consumer debt |
| | | | | counseling program in order to qualify for special |
| 3. Waiting until the last minute to obtain financing | | | | financing under the Homeowner Stability Initiative), |
| Many homeowners with an adjustable rate mortgage | | | | otherwise, steer clear of these types of services |
| start to inquire about refinancing only 2 to 3 months | | | | while you are seeking a home loan. |
| before their initial rate expires, but by then it's often too | | | | |
| late. Because the criteria to qualify for all types of | | | | Understanding the home financing process and how to |
| mortgages have become more strict; if you have a | | | | manage your credit well before obtaining a mortgage |
| loan with a high interest rate or payments that are | | | | will ensure you get the best and safest terms as well |
| scheduled to reset in the next 1-3 years, you'll want to | | | | as avoid the common mistakes that can cause your |
| start getting prepared now. Unfortunately, many people | | | | loan to be denied. |
| who have had their homes foreclosed on or are now | | | | |