Choosing the Best Time to Apply for a Home Loan

This might be considered a non issue since we mostly feel that the time to apply for a mortgage is when you are buying a house. This is generally correct, but you can improve your chances of obtaining a mortgage by timing some crucial steps.

Why ,you ask? First we have to understand how credit ratings work. Some people are not concerned about their credit score, but when they are applying for a mortgage, they must be. Improving your credit score can make a big difference in the mortgage you obtain.

So if you have decided that now is the time to start thinking about buying a house, now is the time to do something about the credit score.

We have to realize what influences the credit score. The credit score is the judgment, expressed by a number, by a credit rating agency about how good a risk a mortgage applicant is. It accounts for many factors, such as when his bills are paid, how many credit lines he carries, what his salary is and how long he has been in the same job.

If you can change some of these important factors, you can improve your score. What are these factors?

Whether or not you have been an on time bill payer in the past, you should become one at this time. You can't change history, but if a lender sees that you have improved your ways, your new behavior may help you in obtaining a loan.

If you are thinking about a mortgage, this will not be the time to be opening any additional credit accounts. Lenders even consider inactive credit lines that are too large a danger, because you have the easy choice of overexposing yourself to debt. Many credit companies offer special deals, such as lower rates, or a department store may offer 10% off any purchases when you open a charge card, but these may not be worth it if you are going to lose your mortgage.

Too many outstanding credit card balances will also negatively influence your credit worthiness, so now is the time to tighten your belt and stop purchasing and start paying off credit card debt.

If you have any control over the decision, avoid changing jobs at this time. A big factor in your credit score is job stability, since it infers you will continue to have a salary. A new job could mean that you are in a probationary period, or in a downturn would be the first one to go, and therefore not able to keep up payments.

Retirement is another big change that can have an impact on your mortgage application.

Lenders prefer to see a continung paycheck to cover the mortgage payment. Apply for your mortgage while you are still working, and then start the retirement process.

You may not be able to put off decisions or make all of these changes, but each improvement in your credit life will improve your score and therefore your chances for a mortgage.
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