NEW YORK (MainStreet) — The biggest piece of debt you're ever going to take on in your life will be a mortgage. All told, Americans have over $8 trillion in mortgage debt. So whether you're buying your first house or your fifth, you should give some serious thought to how, where and even when to get your mortgage.
But with mortgage rates inching up to to 4.18% nationwide and the Federal Reserve expected to raise interest rates later this year, consumers are looking to lock in low mortgage rates while they still can. Of course, when it comes to borrowing money to buy a house, it might make more sense to wait a little bit than to buy right away.
Fix Problems With Your Credit First
"People tell me that they're looking to buy a house, but they just found a problem with their credit," says Gerri Detweiler, director of consumer education with Credit.com. This mistake might not make a big difference when it comes to your credit score. However, Detweiler says that just 30 points might make the difference between one loan product and another. Patience, in this instance, may be more than a virtue; it can be a cash-saver. "If you rush in, you might get a loan that's more expensive and it can be expensive to refinance out of that loan in a year or two," she said. Waiting a bit can give you time to give your credit report some TLC, remove mistakes or old bad debts and get yourself in a better position to borrow on more favorable terms.
There are other problems you can have with your credit than just mistakes. "A federal tax lien is something that you can fix," says Detweiler. "Or your balances might be closer to your limits than what is ideal." She also advises caution when disputing mistakes. "You have to be careful, because an open dispute on your credit report might slow down your mortgage process," Detweiler says. "You have to dispute it, but make sure that the dispute is finalized before you apply for a mortgage." That usually takes a couple of months to accomplish.