(2) Check your credit report for errors, oversights.  Credit reports often contain errors that can lower the credit score derived from it (which is what lenders look at).  Check your report for inaccurate information and get mistakes corrected BEFORE you apply for a mortgage.  You need to check all three credit bureaus—Equifax, Experian and TransUnion—to see if your report contains inaccuracies or oversights.  Common errors that can hurt your scores include not clearing a balance when a loan has been paid off, listing accounts you’re not responsible for or failing to include a credit account. You are entitled to one free report from each of the bureaus every twelve months.  To obtain one, go towww.annualcreditreport.com or call 877-322-8228.  If you find an error, you need to dispute (correct) it.   A fact sheet at the Federal Trade Commission web site, www.FTC.gov/bcp/edu/pubs/consumer/credit/cre21.htm  tells how to dispute errors. 
If there are errors, deal with them immediately.  The credit bureaus will charge you if you want to see your credit score, not just your report. An alternative is to see a mortgage specialist, who can run your credit report for you, let you know your scores, and advise you about how to increase them.

(3) Keep credit lines open to optimize your credit score.  Closing open credit lines usually hurts, not helps, your credit score.  It’s the relationship between your available credit and what you owe, along with how long you have been managing that credit, that largely determines your score.  Consolidating several credit cards into one shows up as a “maxed-out” card.  But having lots of available credit and using a small percentage of it scores high.  If you do close an account, make sure it is not one with a long (and valuable) credit history.  The longer you have a good credit history with a credit card, the better your score.

(4) Put off any major purchase until after you are in your new home.  Getting a new car loan will significantly and unfavorably alter your debt ratios.  In addition, the new car loan will not have a payment history, so it also lowers your credit score.  You can hurt your credit score just by going out to shop.  Each time a store runs your credit, it affects your score.

(5) Get a bank account.  You should expect that you will be asked to show the source of funds for closing costs, prepaids and escrows, along with reserves and any downpayment.  To do this, you will need a visible trail for the money.  Mattress money and unexplained large deposits invariably raise doubts about the source of those funds.  A gift from a parent or relative is viewed as a loan (though some programs do allow for gifts) unless the funds have been in your bank account for at least three months.

(6) Postpone switching jobs or making a career change until after you settle.  Lenders double check loan applications before settlement to verify that you are still working at the job you listed on the application.  Purchasers who quit their jobs before settlement in anticipation of finding employment closer to their new home could wind up losing the house.

(7) Substantiate your rent payments.  Most first-time buyer programs place an emphasis on rental history as evidence you are capable of paying a mortgage, since a rent payment closely resembles a mortgage.  If you rent from an individual, lenders require twelve months of either cancelled checks or bank statements showing the same amount going out each month.© 2007, Real Estate Information Services, Capitol Assets, Choice Real Estate, Inc. & Choice Finance®