HomeFit Issue 1- Barbara Haggerty HomeFit Issue 1- Barbara Haggerty | Page 9

and you owe $20,000, then your
credit utilization rate is 67 percent.
This rate has a great effect on your
overall credit score. The lower the
percentage, the higher your credit
score will be, vice versa.
According to industry experts, a
good credit utilization rate for a
first-time homebuyer is less than
33 percent. If your rate is higher
than this, you will have to make a
serious effort to pay off as much
debt as possible and satisfy any
unsettled notes. On average, it
takes about six months to improve
your credit score.

3. Get Documentation in
Order

The exception to this rule is the
documentation lenders require
of first-time homebuyers who
are self-employed or are in
commission sales. If you fall into
one of these categories, you
should be prepared to produce
up to three to four years of W2s.
Lenders are looking for steady
income and to make sure your last
two years or earnings were not an
anomaly.
While taking these steps may seem
like a lot of work, getting your
credit score, working to improve it
and gathering your documentation
will greatly increase your chances
of acquiring a mortgage for your
first home when you are ready to
buy.

As we mentioned, today more than
ever, mortgage companies by law
are requiring documentation of a
potential borrower’s income and
taxes. The day of the so-called
no-doc loan, where no such
documentation was required,
is gone. In general, a mortgage
lender will ask a first-time
homebuyer to produce two recent
pay stubs and the last two year’s
W2 forms in order to apply for a
loan. In addition, the lender will
require the applicant to provide
two months of bank statements.

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