Your Credit Score
Planning on purchasing a new home but not sure where to start? A basic understanding of your credit score is an important first step in the process of acquiring your dream home.
When applying for a mortgage, a lender will review your credit history. A negative history can have an effect on your new mortgage regarding rate and down payment requirements. Blemished credit is both stressful and costly, but it’s not the end. If you are ready for the commitment to purchase, plan ahead. There is still time to improve your credit history and take advantage of home ownership in today’s real estate market.
1. Obtain a copy of your credit report. Credit Reporting Act guarantees you access to a free credit report from each of the three nationwide reporting agencies — Experian, Equifax, and TransUnion — every twelve months. It’s free here.
2. Eliminate issues – Pay down large sums of any revolving debt. Spot identity theft. Dispute any inaccuracies.
3. Practice good habits – Lenders will be looking at your rental payments, car payments, etc. Pay your bills on time! Most lenders look for 1 year’s worth of good history. Demonstrate to a lender you are capable of making monthly mortgage payments.
4. Establish a credit history – If you lack one, secure a credit card and begin making timely payments. Make sure the credit card company reports your payment history to credit reporting agencies.
5. Talk about housing needs with your significant other – Do you have realistic goals? Do you share priorities and a vision of what your new home will be? Does the area include future employment opportunities? Your first home may not be your dream home, but it should be a place that you envision sharing for a minimum of 2-3 years.
Purchasing a new home in today’s climate certainly has its advantages, including historically low rates, competitive pricing, tax write-offs and tax credits. Don’t be discouraged by a less than stellar credit report. Make the changes today so that you are prepared for tomorrow.