Before you apply

Finding a house for the right price is often an arduous task and can take a long time. Once it is finished, you may be tempted to run to your nearest lender to get the application process rolling. Simply put, this is not a good idea. There are a few things you need to take care of before you start talking to lenders.

Basically, lending money is a risky business. For this reason, lenders want to be as confident as possible that they are lending money to a person who intends to pay it back. In finances, as in other areas of life, our past behavior is a pretty good indicator of how we will behave in the future. Since your potential lender does not know you personally, your credit report and credit score are tools used to gauge your viability as a borrower. In other words, your credit history will help a lender determine how risky it is to lend you money.

To make sure that you can get the best possible mortgage, you’ll want your credit report to be as pristine as possible. If you have had any credit problems (late payments and so forth), you should be prepared to explain exactly what happened and why it won’t happen again.

Even if you have impeccable credit, it is still a good idea to examine your credit reports (there are three reporting agencies, and your report will often be slightly different depending on which one you look at). Most credit reports have mistakes. You will want to make sure that yours is a completely accurate reflection of your financial history.