If you are looking for a mortgage for your home, the first tip you should follow is to stop immediately. Do not go talk to any lenders until you have gotten a copy of your credit report and you know exactly what is in it. Yes, your mortgage lender is going to go through your credit history and credit report, so you may think there is no need for you to get one.
But nothing could be further from the truth, and you do not want to wait until you are in front of your lender to find out that you have negative marks in your credit report which are really hurting your credit score. You need your credit report so you can know what is in it, and you need to know your credit score.
Scores above 720 generally do not have anything to worry about because they will get the best mortgage loan terms. You can try to raise your credit score if you want, but it will not really make any difference on the terms you are offered. From 621 to 719, you may end up paying a premium of 2% or more on the loan the lower you are. You might not get the best rates if you are at 695, but you might only pay half a percentage point more than someone at 720. If you are at 620 or below, you will have rates that are adjusted to reflect the higher risk, perhaps 3% or more than someone with excellent credit.
Now you can begin to see why it is essential get your credit report, and to try to correct any errors or inaccuracies. It may mean about a 3% difference in the rates that you will be charged on your mortgage loan. Over the life of a thirty-year mortgage, the difference can run into the hundreds of thousands of dollars, depending on the size of the loan.
Another great tip to qualify for a good loan is to get your credit and spending under control. The less money you owe, the lower your debt-to-income ratio will be, and the more favorably that your mortgage lender will look at your loan application. And getting your credit and spending under control also means not requesting any new loans or credit cards because each inquiry on your credit report can lower your score by as much as 12 points.
If you want to qualify for the best terms available, you will have to become conservative with your finances, learn to save, pay your bills on time (being late just one time before applying will really seen unfavorably by your lender) and show that you are not a risk of defaulting on a mortgage loan. What the mortgage lender will do with you is assess the risk it is taking by loaning you the money. If you present too much of a risk, you will not get the most favorable terms if you are offered any terms at all.
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