This is a function of a couple things. How much of a monthly payment can you afford? And given your unique credit and employment history, income and debt, and goals, how much will a lender loan you?
If you are planning to obtain a construction loan or a land loan to build your dream home or are in the process of applying for a home purchase mortgage or home equity line of credit, maximizing your credit score is inevitable. Have you asked yourself: “How much can I save?” Know how you can maximize your credit score, and you won’t be sorry. Below are some tips to maximize your credit score:
Pay off outstanding collection accounts only if it is originally dated within the last two years or if the lender/collection agency is updating the report. As wrong as it sounds, check all the dates associated with the item and if they are older than two years, leave them alone. Believe it or not paying an item older than two years will actually have an adverse effect on your credit score.
Carefully plan to pay as much debt as possible. The object of the exercise here is to bring down revolving accounts down to 50% of the maximum credit line or even to under 33% if possible. If your co-borrower has a card say with only 5% or so against it, then borrow on that card to up to 30% and use the money to pay down one of your high balance cards or vise versa. It is important to pay attention to the total credit line and total debt also. Having 3 cards of zero balance with credit limits of $150 to $300 each is no good if you have one $3500 limit card with a $2500 balance.
Do not pay off and close a revolving account. Closing a revolving account has an immediate adverse effect on your credit rating.
Call your credit card companies and see if they will increase your credit limit. This will bring the ration of outstanding debt to credit limit down.
Don’t buy a car! Nothing brings down a credit score more dramatically than a new car loan. A fixed term loan will have a negative effect on your credit score for up to 6 months. The negative effect gets lower with every passing month tuning into a positive effect after 6 months, providing payments have been made in a timely fashion.
Get all in accurate information removed, we have a whole page dedicated to this subject including a sample letter.
Also remember that not only will your lender need standard credit documentation, but also, in order for your lender to see your vision as clearly as you do, your lender will want copies of the following:
1) Final architectural plans and specifications to obtain an appraisal.
2) Purchase contract for existing lot (or Closing Statement if you’ve closed the purchase
transaction).
3) Description of Materials.
4) Line item cost breakdown prepared by the contractor.
5) Your Contract with Builder.
6) Copy of the contractor’s license.
7) Builder’s statement or application.
Don’t forget to get the necessary building permit for your community!