Next, you should obtain free copies of your credit reports from www.annualcreditreport.com and start working on improving credit score six months prior to expiration date on your existing pre-payment penalty.

There are five factors that make up credit score and your mortgage consultant can coach you through some basic strategies to improve your credit score. This means very conservative use of credit cards, paying off debt as much as possible and not applying for additional credit cards unless you will benefit from such action. You will want to verify that negative items you have paid off are being removed from your credit report, and that good credit history is being reported to all three bureaus. You’ll also want to dispute any errors that appear on your credit reports and seek to have those removed entirely.

Once your credit score improves, it’s time to refinance at a better interest rate. Your mortgage professional should look for a program that carries no more than a two-year prepayment penalty so you can continue to refinance as your credit score increases. You can repeat this process until you reach A-paper status and secure best interest rate available.

This is a strategy that also works well for first time home buyers who do not have enough credit history under their belt to get an A-paper loan at time of purchase. The important thing is to work with a mortgage consultant who can give you a roadmap to follow and a strategy for success in building personal wealth.

To find loan program that is right for you, your mortgage consultant will need to evaluate your monthly household income, current assets and savings, as well as any monthly obligations you may have for credit card payments, car payments, child support, etc. These prequalification factors, along with report of your credit score, will determine how much house you can afford and what interest rate you will pay for financing. It is also important to let your mortgage consultant know what your future goals are, because this will help narrow down which loan option is best fit for your long-term needs. There are many different types of loan programs available, including “low” and “no” down payment mortgage programs. These types of programs require borrower to provide less than 3 percent of loan amount as down payment. FHA lenders rule that mortgage payment, including principal, interest, taxes and insurance (PITI) should not exceed 31 percent of your gross income, and PITI plus other long-term debt (car payments, etc.) should not exceed 43 percent of your gross income.

Housing is an expense that takes a big bite out of monthly budget. If you are a renter and feel that “home” is more than just someplace to hang your hat, think about advantages of purchasing real estate. It may be time to take step into building your personal net worth as a home owner.