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Move On

As soon as you have finished doing all the paying down and student loan-type work that you are going to do from the list above, go through your credit report one last time and check off all the items that should be different now than they were when you originally pulled them. Now, you need to initiate the dispute process with each of the three credit bureaus for (a) all of the erroneous or fraudulent items, and (b) all of the items that you have caused to change while you were doing the quick work and the easy work, above. Once you dispute an item on your credit report, the credit bureaus immediately make a put up or shut up proposition to the creditor who was reporting the disputed item. If the creditor does not validate the disputed item within 30 days, the credit bureau erases it from your report.

It may take two or three rounds of disputes to get your report clear of all the incorrect items. I cannot impress enough the importance of moving forward with your homebuying process after the first round (while continuing to dispute errors until they are gone). As you improve your credit score through further rounds and through responsible use of your credit, your FICO scores will move up and your risk ratings will decrease, and you can refinance into progressively higher grade (i.e., lower interest & better terms) mortgages.

Do not wait for further rounds of credit report disputing to be complete unless:

• Your credit score is still under 580 -- FICO scores below this point qualify only for severely subprime loans. If errors or accurate delinquencies on your credit reports are placing you below this point, it may very well be worth waiting until they are gone or less recent.
• Your mortgage professional tells you to wait -- Every once in awhile, a client will have a credit score of 698 and the ideal loan program for them will require a mid-FICO of 700. There's no hard and fast rule for knowing when it's advisable to wait because your score is on the cusp of a hundred-point mark, except that once your score is over about 740, there's really no advantage to waiting (the best loans are offered to people with scores over 740 -- it makes no difference whether the score is 750 or 800). It totally depends on whether an increased score would make an improvement in the rate or terms for which you qualify -- and that's a question for your mortgage professional.

When you've received your revised credit reports, recalculate your personal statistics, including your new FICO scores. Other than the numbers, there is a short list of qualitative questions to ask yourself to round out your personal profile before you start looking for a compatible mortgage:

• Fluctuations in income -- Is your income steady, or does it fluctuate monthly or seasonally?


• Priorities -- What are your priorities for the financial side of this purchase? Are you trying to get maximum appreciation, get as low a payment as possible, or fit your five kids in as big a house as possible?


• Your Tax Situation -- Do you usually have to write a big check at tax time?


• Your Exit Strategy -- Why will you relocate when you move from this home? (Answers I've gotten to this question range from getting into a better school district to "they'll carry me out in a pine box.")

With this list in hand, you know enough about yourself to start weeding through the mortgage program types and start figuring out which of them might be compatible with your life!

<< Do the Easy Work I Give Your Credit Score a Not-So-Extreme Makeover >>

GO TO: First-Time Homebuyer's Guide

Read the Top 10 Ways to Beat the Sluggish Housing Market:

1. Give your house a makeover that adds value
2. Use the secrets of staging experts, or hire one
3. Find out what's wrong with the house and get it fixed
4. Come up with a comprehensive home-selling strategy
5. Hire an aggressive, well-connected real estate agent
6. Help a buyer buy it
7. Consider renting or offering a lease option
8. Make the house move-in ready
9. Use calculators and tools to evaluate your potential purchase
10. Evaluate and boost your financial profile

More on FrontDoor:

• FrontDoor's Top 10 Tips and Advice on Everything Real Estate
• Search Homes for Sale
• Experienced Homebuyer's Guide
• Drama-Free Real Estate Guide
• Experienced Homebuyer's Guide
• Home Finance Guide
• Tools and Calculators