Your credit score is critical when it comes to purchasing a home! Many buyers contact me thinking they are ready to buy a home, but then they find that something is going on with their credit. This causes a delay and they have to take some time to get into a better position. If you’re thinking about purchasing a home in the next 6-12 months, start checking your credit now so there are no surprises!
Here are the many things affected by your credit score when purchasing a home:
The top reason your credit is essential when purchasing a home is the type of loan you will get. Having excellent credit can get you into a conventional loan. That’s when you have a perfect credit score and have some money to put down for the loan. If you don’t qualify for a conventional loan, then you will be looking at government loans. Some types of government loans include FHA, VA, and USDA. It’s essential to remember that the type of loan you have can hugely impact the chances of your offer getting accepted over others. When you’re in a multiple offer situation, which is happening more frequently, a conventional mortgage is most favorable. When you have a government loan there are more requirements and it’s more challenging to purchase a home in this market.
Your credit score affects your interest rate, which is enormous because this could add hundreds of dollars every month to your mortgage payment. If you have an excellent credit score, you’ll be able to get into a good loan as well as get a low-interest rate. If your credit score is on the lower side, your interest rates could be higher. If your credit score is too low, you run into the problem of not getting qualified for any loan at all.
Your credit score and a couple of other factors affect how much your loan amount is. The preapproval process helps your lender determine the amount you are able to get qualified for. Some other elements are the amount of debt that you have, the income that you’re making, and also your credit score. If you are thinking of purchasing a home, even if it’s six months down the road, talk to a lender and check your credit score. The lender can give recommendations to increase your credit, which can increase your loan amount. Lenders can do a soft pull on your credit and get you a preapproval which will allow you to know your budget.
Know your credit score and do things to improve it. The better your credit, the better position you will be in when you’re ready to buy a home.