Rates May Be Rising Mortgage and Refinancing Preparation Made Simple for You

Are you thinking of buying your first home or refinancing your present home? Buying a home is a very big step -- probably the single largest investment most people make in a lifetime! Before you plan a home purchase or refinance, you'll need to prepare yourself and your credit to ensure the finance process will be a smooth one. In addition to potentially saving thousands of dollars on your loan, the following information will show you how to improve your financial profile. Get started now to take advantage of the low interest rates before they disappear.

Start By Checking Your Credit

* In order to get the best possible mortgage rate, make sure your credit history is accurate and healthy. To qualify for most prime loans you should have a credit score above 650.

* What do you do when you've checked your credit history and it's not quite 650? First of all, focus your efforts on paying bills on time, reduce your debt balances, avoid new inquiries and clear any negative inaccuracies from your credit report.

* Make sure the information on your credit report is correct. If not, fix any problems you discover, giving yourself 30 to 90 days for correcting inaccuracies, and also making sure you deal with a reputable credit-reporting agency.

* If you happen to find an error while reviewing your credit with a lender, ask about the "rapid rescoring" process where you can submit a dispute and potentially improve your credit in 72 hours.

Figure Out How Much You Can Afford

* According to the "rule of thumb law" most borrowers can afford a home that runs about 2 and 1/2 times their annual salary.

* To see how much you can afford to borrow, calculate your loan-to-value ratio by dividing the loan amount by the property's value. If your loan-to-value ratio is above 80%, your rates may increase significantly. If that's the case, you'll need to either find a less expensive home or save up for a down payment to lower this percentage.

* In order to calculate your debt-to-income ratio, add up your monthly debts and divide by your monthly income. A debt-to-income ratio under 20-39% -- usually considered good -- will help you be perceived as financially stable.

* Qualifying for a larger loan doesn't always mean it's a smart financial decision to buy a large home. Before you decide how much you can really afford, take a careful look at your family budget and your housing needs. Don't be afraid to start small.

It's really quite simple. By preparing your credit before you apply for a loan, you may be able to save yourself thousands of dollars.