Chapter Six - Getting Ready to Buy

Sooner or later you'll get the "buying bug." It may hit you suddenly and you'll wish you'd done some advance planning. Renters should do the following to prepare to qualify for a loan.

  • Get help: The first step is not to find the home of your dreams, but to call a local HUD-approved housing counseling agency for a confidential counseling session by phone. HUD is the U.S. Department of Housing and Urban Development and sets the rules and regulations for the housing industry. HUD-approved counseling agencies must abide by federal law and report directly to HUD. The HUD-approved housing counseling agencies at the time of this publication are:
    • Chattanooga Neighborhood Enterprise: Offers nationally accredited homebuyer education classes and one-on-one credit counseling and debt management to help you get ready to buy a home. Also offers down payment assistance and first mortgages to qualified buyers. Phone: 423-756-6201, Email:, Website: click here.
    • Consumer Credit Counseling Service: Offers homebuyer education and one-on-one credit counseling and debt management. Phone: 423-490-5630, Website: click here.
    • Catholic Charities of East Tennessee: Offers fair housing pre-purchase education workshops and financial management and budget counseling. Also offers rental housing counseling. Phone: 423-826-0662, Website: click here.
  • Start saving: Open a special savings account for your down payment. Aim for $1200. Lenders look for a pattern of regular deposits and few withdrawals.
  • Build credit: Get a copy of your credit report and make written arrangements to pay off collection accounts. Stick with your agreements to pay! You can't make a mortgage loan otherwise.
  • Don’t miss a payment:  Make rent payments on time because the lender will check with your landlords. Pay by check or money order and save receipts.
  • Pay bills on time: Late payments in the past two years that are reported to a credit bureau or show a collection could disqualify you from a mortgage.  
  • Stick with that job: Most lenders require two years in the same job or field.
  • Reduce debt: Payments on borrowed money or revolving credit should take no more than 12% of your income before taxes or other deductions, no matter how much you make.
  • Raise household income to at least $20,000 per year. Income from part-time jobs or child support will be counted if it's been regular for two years.
  • Don't file bankruptcy: Bankruptcy is a formidable barrier to home ownership unless it was caused by a medical disaster.