Before you get approved for a mortgage, it is a good idea to get a checkup for your credit score. There are a few red flags that lenders look for which could potentially get in the way of you getting your dream home.
For instance, if you are trying to get an FHA (Federal Housing Administration) insured loan, late student loan payments within the last 12 months could make it less likely for you to be approved. To avoid this, make your student loan payments on time and consider and automatic payment option if possible so you never accidentally miss a deadline.
Lenders will also look at your debt-to-income ratio to assess how risky financing the mortgage will be. They will look at any past delinquencies and your overall credit and payment history. Be sure to pay your bills on time and that your monthly mortgage payments will be something you can afford with your current income.
Other red flags include bankruptcy, short sales and foreclosures. Luckily, over time, these red flags can be less of a problem. So if you have recently filed for Chapter 7 bankruptcy, within 24 months you can be eligible for an FHA loan at 3.5% down.
Even if you have bad credit or past financial mistakes or oversights, there are many lenders and mortgage options that can still allow you to be approved for a home loan.