(1) Not knowing exactly what there credit score is before they get pre-approved.
As a previous Mortgage Broker I am experienced with this frequent unawareness of people. When you begin to think that you are interested in buying a home. Find out immediately what your score is. Yes the Broker/Loan Officer will have to pull your credit but you need to know where you stand for yourself, so you know what you can and cannot do.
(2) Not settling or paying off collection accounts. Face it the days of collection accounts being ignored ended from the mortgage housing deep fall. It is important to be as pristine as possible when you apply for mortgage. Think like the bank. Why would they risk getting into a 15-30 year loan relationship to a person who will not pay their medical bill or old light bill. Opinions differ on whether or not to pay off collections. My opinion is either settle it and request removal or pay it off especially when buying a home because 1st it will effect whether you are approved for the home of your dreams or 2nd it will effect your interest rate or deposit requirement on a 15-30 year old. SETTLE AND DELETE OR PAY IT OFF.
(3) Debt to Income Ratio (DTI). You can analyze this before you even begin looking for a house. You need to know and be prepared to lower your debt to income ratio to determine what and if you can afford a house. DTI is your total debt figure divided by your income. For example if your monthly debt is $2000 and your income is $6000 a month then your DTI is 33%. The 36% Rule states that your DTI should never pass 36%. So you are in good position. There are ways to lower your DTI quickly. (a) Increase the amount you pay monthly toward your debt. Extra payments can help lower your overall debt more quickly. (b) Avoid taking on more debt. Do not go finance a car right before you are buying a house. (c) Postpone large purchases so you’re using less credit. Do not go out and finance a laptop on our Best Buy card (d) Recalculate your debt-to-income ratio monthly to see if you’re making progress.
(4) Believing you do not need a down payment. It is best to be prepared. Have 20% of price ready and available to help with financing your home. It is possible to get financing without anything down but with your Dream Home purchase you do not want to be ill prepared for all situations.
(5) Not having enough good tradelines. You say but Cynthia you said do not spend. Ok I am sticking to that, but you need tradelines to help improve and increase your credit score to get the lowest interest rate available at purchase. So have minimally 2 open tradelines but with low low low balances under 10% of the limit on that account.