What Home Buyers Need to Know About Credit
For most people, buying a home is the biggest purchase they will ever make. To make that purchase, most home buyers require a mortgage loan of hundreds of thousands of dollars. Lenders want to be sure that you can and will pay that money back before they issue the loan. That means checking your credit.
The best loan programs and the best interest rates require higher credit scores. Many of the rates you see quoted in the newspaper or online will require a 720 credit score or higher. You can still buy a home with lower credit scores, but you’ll probably pay a higher interest rate and may need to put more money down or submit extra documentation.
As a home buyer, you have to know what is in your credit report and how it might affect your ability to buy a home. You are entitled to a free credit report from each credit bureau each year. Buying a home is the perfect time to request it. Be sure there are no errors that will count against you. If you have some extra money that you won’t need for the home, you can pay down some of your credit to decrease your overall credit utilization and improve your credit score.
The most important thing to remember is that once you have gotten a firm mortgage quote or put an offer in on a house, do not make big changes to your financial situation. The most common mistake home buyers make is buying a car while their home buying process is still going. Do not take out additional loans. Do not apply for new credit cards. The changes you make to your credit situation can result in your lender pulling their loan offer and may make it harder to qualify for similar financing again.
Want more credit tips for home buyers? Contact Key Credit Repair today!