Stop Procrastinating, Buy Now!
No matter what your financial stats are, they can almost always be better. This is a double-edged sword. It's great because with a little bit of work, most of us can improve the snapshot of our finances seen by lenders. It's not so great because some prospective buyers -- who could qualify for a mortgage -- use the idea that they are "working" on their credit or saving up for a down payment as an excuse to procrastinate on actually buying the stinkin' house!
This "strategy" makes no sense, because even in a slow market, home prices rise much faster than you can raise your credit score or pay off a significant amount of debt. In the one to two years it takes to significantly improve your credit scores, home prices will rise so much that you either (a) can afford a much smaller or less nice home than you could have originally, or (b) can't afford to buy anything anymore at all. When you compare the potential interest rate savings corresponding to a higher credit score with the opportunity costs of waiting to buy until your score is higher, you quickly see that what you want to do is just a quick mini-makeover of your finances to make sure you display them in the best light possible, then go ahead and buy as much house as you can right now to get that equity building - even if the state of your finances means you can't qualify for A+ terms on your mortgage right now. Once you are in the home, you can start the more in-depth, long-term work on your credit scores, debt reduction, etc. so that a year or two down the road, you can refinance into a new mortgage with better rates and terms!
