First Time Home Buyers Should Check Their Credit Early
The idea of buying a home has been firmly been planted in your mind. Your next step might be to start saving up for a down payment. Because it can take a long time to save the amount of cash that you need, you figure it is best to start as early as possible. But saving up for a down payment isn’t the only thing you should start early.
Your credit score is a number that lenders and banks use to help predict your ability to meet your payment requirements. Unless you have saved the entire home purchase amount, your credit score will play a part in getting a mortgage.
Why is credit score so important when first time home buyers want to buy a home? In essence, your credit score, and your entire credit report, plays a huge role in dictating the amount you are allowed to borrow, the interest rate you will get, and the conditions of your mortgage. If you are deemed a low risk, meaning that you most likely can and will make your payments on time and in full, then you stand a better chance of getting the terms you need to purchase your dream home. The lower your credit score is, then the worse your mortgage conditions will be. For example, you may still get a mortgage with a credit score of 580, but with certain restrictions.
Consequently, your credit score can raise eyebrows from mortgage lender, even if other aspects of your mortgage application are sound. But imagine this: first time home buyers are denied a mortgage, or given an unaffordable interest rate, based on incorrect information!
That’s right. Although your credit report is an important financial record that lists your address, job history, credit payment history, and more, like many other records, it can contain errors. If they are not corrected, then your mortgage lender can deny you a mortgage based on false information. Given that lending standards are becoming increasingly strict, do you really want to forgo your dream home based on wrong information?
Just when you start to save up for your down payment, you should also get a copy of your credit report. There are three different agencies (Equifax, TransUnion, and Experian) that collect the details about your financial history. With their own specific algorithms, they each determine your credit rating based on the information that they have. Because each agency collects their information independently of the other two, it is possible that one agency has incorrect information while the other two do not. And because you do not know which agency your mortgage lender (it may be all three) will use to analyze your credit history, you should get your credit report from each of the three agencies.
The good news is that you are get a free copy of your credit report every year to review. Even better news is that the information on your credit report can be fixed in two ways. The first is to dispute issues on your credit report that are incorrect, inaccurate, or misleading.
The second is that if you realize that you credit score isn’t where you want it to be to secure the loan that you want, then you can change it. But like saving for a down payment, you have to start early. If your credit report indicates that you make occasional late payments on a credit card, then you can start making sure it is paid on time. If you constantly carry a balance on a credit card, then you can work hard to pay it off. But all of these changes take time to repair and to be reflected on your credit report, and eventually, in your credit score.
When buying a home, the importance of reviewing your credit report cannot be understated. For first time home buyers, checking your credit as early as possible needs to be towards the top of your list.
Make sure that the process of buying your dream home doesn’t turn into a nightmare. Start by checking your credit, make any needed changes on the report or in your finances, and buying your first home can truly be a great experience.
The idea of buying a home has been firmly been planted in your mind. Your next step might be to start saving up for a down payment. Because it can take a long time to save the amount of cash that you need, you figure it is best to start as early as possible. But saving up for a down payment isn’t the only thing you should start early.
Your credit score is a number that lenders and banks use to help predict your ability to meet your payment requirements. Unless you have saved the entire home purchase amount, your credit score will play a part in getting a mortgage.
Why is credit score so important when first time home buyers want to buy a home? In essence, your credit score, and your entire credit report, plays a huge role in dictating the amount you are allowed to borrow, the interest rate you will get, and the conditions of your mortgage. If you are deemed a low risk, meaning that you most likely can and will make your payments on time and in full, then you stand a better chance of getting the terms you need to purchase your dream home. The lower your credit score is, then the worse your mortgage conditions will be. For example, you may still get a mortgage with a credit score of 580, but with certain restrictions.
Consequently, your credit score can raise eyebrows from mortgage lender, even if other aspects of your mortgage application are sound. But imagine this: first time home buyers are denied a mortgage, or given an unaffordable interest rate, based on incorrect information!
That’s right. Although your credit report is an important financial record that lists your address, job history, credit payment history, and more, like many other records, it can contain errors. If they are not corrected, then your mortgage lender can deny you a mortgage based on false information. Given that lending standards are becoming increasingly strict, do you really want to forgo your dream home based on wrong information?
Just when you start to save up for your down payment, you should also get a copy of your credit report. There are three different agencies (Equifax, TransUnion, and Experian) that collect the details about your financial history. With their own specific algorithms, they each determine your credit rating based on the information that they have. Because each agency collects their information independently of the other two, it is possible that one agency has incorrect information while the other two do not. And because you do not know which agency your mortgage lender (it may be all three) will use to analyze your credit history, you should get your credit report from each of the three agencies.
The good news is that you are get a free copy of your credit report every year to review. Even better news is that the information on your credit report can be fixed in two ways. The first is to dispute issues on your credit report that are incorrect, inaccurate, or misleading.
The second is that if you realize that you credit score isn’t where you want it to be to secure the loan that you want, then you can change it. But like saving for a down payment, you have to start early. If your credit report indicates that you make occasional late payments on a credit card, then you can start making sure it is paid on time. If you constantly carry a balance on a credit card, then you can work hard to pay it off. But all of these changes take time to repair and to be reflected on your credit report, and eventually, in your credit score.
When buying a home, the importance of reviewing your credit report cannot be understated. For first time home buyers, checking your credit as early as possible needs to be towards the top of your list.
Make sure that the process of buying your dream home doesn’t turn into a nightmare. Start by checking your credit, make any needed changes on the report or in your finances, and buying your first home can truly be a great experience.