Cosigners are sometimes needed when an individual takes out a loan and has bad credit or no previous credit at all. Now, while I am highly reluctant to loan family or friends money, and don’t think I would ever agree to be a cosigner unless it was for my own child- I have needed one in the past. I would never have gotten my first apartment if it weren’t for a family friend who rescued me and agreed to be my cosigner- and for that I will be forever grateful. Of course, I made sure to pay my rent in full on time every month- so she had nothing to worry about. Messing up HER credit because of my irresponsibility would be appalling, and I don’t think I could have lived with myself. I’m not trying to toot my own horn or anything (I just try to be a decent human being), but some cosigners end up with “deadbeat” borrowers- and it can wreck your credit. Read this post by Dr. Don Taylor at Bankrate for more info. When a loan goes under,

Your credit can’t be saved, only rebuilt at this point. With your damaged credit history, time can heal the wounds if you’re willing to work at it. Negative information remains on credit reports seven years after the first reporting. The duration is 10 years for Chapter 7 bankruptcies.

My advice? Don’t be a cosigner- unless you KNOW for a fact that they are financially responsible- or if your relationship with them means more than your credit.

Photo Credit: Holly Lay 

The first piece of advice that is given for people looking to buy a home is to get your credit score together. Lenders simply do not want to work with people who don’t pay their bills on time, or who already have massive amounts of unpaid debt. To them, it shows that you’re untrustworthy. Now, I know that stuff happens. Bad things can sometimes happen to good people– that doesn’t mean that you shouldn’t be able to buy a house. For advice on how to fix your credit before you apply for a mortgage, read this post by Scott Sheldon at Yahoo Home Finance:

–Fix Maxed-Out Credit Cards: Carrying credit cards with maxed-out or near maxed-out balances can be catastrophic to a credit score. 

–Don’t Close Credit Cards: Don’t close credit cards, even if you are not using them.

–Reverse Late Payments: Late payments on a mortgage are by far the worst possible derogatory credit item

Photo Credit: Rob Sywston 

Applying for a mortgage and getting pre-approved can be a pretty confusing task. Lenders are going to look at all your finances to determine if you are going to be a reliable borrower. You should already know that you should have your credit score in order, make payments on time, work on paying off debt, and have a steady income. But what exactly do you need to bring to the lenders? What sorts of paperwork do they need to see? If you’re horribly organized (like me), it will give you a leg up if you know what you need before you go in. Check out this post by Whitney Watson at Loan Officer Lately for the documents you should prepare:

-Most recent 2 years of W-2s*

• Most recent 2 years of tax returns*
• Pay stubs for the last 30 days
• Your previous two months bank/financial statements for all accounts
• If applicable, complete bankruptcy documents (if discharged fewer than 10 years ago)

Photo Credit: Joel Penner