1. Get a copy of your credit report. You can do this yourself or you can have a Broker check it. Remember there are three bureaus, so check all three.
Some Brokers will only pull one unless you ask for three. If they won't pull all three, go elsewhere or pull them your self.
Ideally, you want a "Tri-Merge" report which merges all three so as to remove duplicate items while still showing all three scores. Your " Credit Score" is the middle of the three. Try http://www.annualcreditreport.com for a free report. At this writing, they don't cover the whole country but will soon.
You can also go directly to the bureaus. The three bureaus web addresses are http://www.equifax.com http://www.experian.com and http://www.transunion.com They may charge a fee or offer the "free" report as part of a credit watch service, which is probably a service you may want as you rebuild your credit.
2. Study the report for accuracy and have any errors corrected. You can do this through each bureau's website, the Broker's credit reporting agency. There may be a charge, but it's well worth it. Correcting derogatory errors on a report can quickly raise your score, qualifying you for higher LTV loans and lower your interest rate. This could save you tens of thousands of dollars over the life of the loan. A Broker's credit reporting agency can also help.
3. Start your road to better credit now. You want to improve it as much as possible so as to refinance as soon as possible. You might even see your score improve before you find just the right house and a package is sent to underwriting. Sometimes an improvement of only a few points will put you into a better category with a higher LTV and/or a lower rate. Ask the Broker what the lender used as your score for the loan at the time of underwriting and if that qualifies you for a lower rate. If you've done your research and found an honest, qualified Broker they will try to lower your rate below their original estimate.
4. Research your area through referrals, advertising and interviews to find a Mortgage Broker that specializes in sub-prime (less than perfect credit) mortgages that you feel comfortable with. If you don't intend on pulling your own credit, this will now become your first step in this process.
5. Discuss your situation in detail with the broker including:
a. Your credit
b. Your Rental payment history and proof of payments
c. Your Employment situation and history
d. The fact that you want a straight zero down loan or one with a seller 2nd or gift of equity with closing costs financed into the loan
e. How much house you qualify for
f. What estimated closing costs will be through a GFE
g. Obtain a Pre-Qualification
6. Find a Realtor who isn't afraid to work with someone who wants to do 100% loan with closing costs financed into the loan. Your Broker may know one. If they balk or seem hesitant, go find someone else.
7. Search the market thoroughly. Be sure the realtor is showing you homes where the seller's situation fits with your needs. This might include 1) Low Mortgage balance, 2) Good value so the appraised value will be above their asking price and 3) A seller that is motivated.
8. Make an offer (multiples if needed) on a home on your terms until you get one accepted and close your home as soon as possible before rates go up.
Have a celebration with your significant other or family. You've earned it. Enjoy your new life as a homeowner while you make all those little improvements necessary to build equity and improve your home's value for the future appraisal relating to a sale or refinance, all the while improving your credit score.
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