In my chosen profession of helping qualified people obtain their piece of the American dream- Home Ownership, I often get the question of "where do I begin". I will start offering tips on my blog that will help prepare prospective buyers reach their real estate goals.
Today, let's talk about two of the most important words in the home buying process that you should remember - Credit Score.
Mortgage companies use a system to rate a person's financial ability. This credit scoring system is called FICO scores. In the following paragraphs I'll briefly explain how lenders arrive at your credit score.
Lenders look at your credit report and your FICO score when you apply for a home loan. They can know all of the debts that you have, how much you owe, how well you make your payments, and many other things like if you've had any bankruptcies, accounts turned over to collection agencies, or accounts closed due to non-payment within the previous several years.
With your credit report, lenders get a "credit score" which takes all of this information into account and creates a "credit score" for you. This credit score is a number that lenders use to decide which types of loans that you will be able to get and be eligible to obtain.
Some types of loans require that you have a certain credit score to get the loan - with no exceptions. Credit scores change over time. Even applying for credit can lower your credit score. This is called "credit inquiries". An upside to "credit inquiries" is that the credit bureaus know that most people shop around for home mortgage loans to get the best interest rate, so mortgage "credit inquiries" don't affect your credit as adversly as applying for credit with other sources. Today most lenders have a minimum credit score of 580- 600 in order for a buyer to be approved for a home mortgage loan.
If you're considering buying a home don't apply for any new credit cards or consumer loans within six months of applying for a home loan. No new furniture, major appliances, or new cars until after you get your mortgage loan and buy your new home.
Buying things on credit before you apply for a mortgage loan not only hurts your credit score, but it also leaves less money for you to use as a house payment.
Lenders look at this figure also to determine how much money they will lend you and how much they will charge you to lend it.
Wait until after you've bought your home and moved before you make those make those major purchases.
At Anacostia River Realty Our Sales Are Flying High!
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