The Diamond Blog

The turmoil in the housing and the credit markets has led lenders to tighten their mortgage standards. While it is more difficult to qualify for a new mortgage, it is not impossible.

Check your credit reports. Examine reports from the three main reporting agencies. Equifax, Experian, and TransUnion. to make sure all information is correct. If you find incorrect information, report the discrepancy to all three agencies. Anything negative on your credit report can hurt you, even if it's incorrect.

Boost your Credit Score. Almost all mortgage lenders use the credit scoring to determine a borrower's default risk. To improve your score, pay down debt, but don't close your accounts. How long you have had open accounts is a factor in credit scoring so you want an amount of longer established accounts even if the balance is zero. Pay all credit accounts on time and keep open accounts with a zero balance.

Put money aside for a down payment. Save at least 5 percent to 10 percent for a down payment. Most lenders are more comfortable granting a mortgage with a larger down payment. No-down-payment mortgages have virtually disappeared. To qualify for a Federal Housing Administration (FHA)loan you'll need 3 percent down.

Get realistic about your budget. A mortgage payment should be no more than 35 percent of your gross monthly household income. This will ensure that you have adequate reserves for other lifestyle expenses and to make your mortgage payments.