mortgageThere are several factors that go into obtaining a new mortgage, but credit tends to always be the most important. So, what do you need to know?

“Credit is getting a bit looser recently, but even people with high credit scores are being denied loans,” says Jed Kolko, economist at real estate site, an observation that’s borne out by that Ellie Mae data. You should order your credit report so you know what you’re dealing with, especially if you’ve never checked your credit before. Getting any mistakes corrected should be your first order of business. After that, look to lower your utilization ratio — the percentage of your available credit you’ve used at any given time. The typical rule of thumb is to keep it under 30%, but lower is better.

Don’t open any new cards. This is old advice, but it’s even more important now that lenders have such high expectations. You might think adding a new credit card would help your utilization ratio, but applying for credit shortly before or during the application process pulls down your credit score. It could be only a few points, but that could affect your rate and even whether you’ll be approved for a loan at all.

Here’s the exception to this rule: If you’re new to the world of credit, apply for the best credit card you think you can get six months or more before you plan to begin the mortgage application process. Since you’ll ding your credit score a little bit, you want to space it out so you get the benefit that credit has on your utilization ratio without taking the hit for opening the new card.

-from Time magazine

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