When you’re serious about buying a home—and looking to qualify for a mortgage—credit matters. Lenders take a long look at your credit scores, and those numbers determine the options available to you.
If your credit score is below 680, or you have credit blemishes or little equity, it can drive up the cost of a mortgage.
Boosting your credit score before you apply for a loan can help you get a better rate, and we’ll cover ways to pull that off. Mortgage lenders look for good credit scores and the absence of bad credit marks, such as:
- Defaults in payment
Payment history is the greatest factor in your FICO credit score, accounting for 35%. The other factors are amounts owed (30%), length of credit (15%), new credit (10%), and types of credit (10%).
Maintaining good credit isn’t always easy, but there are steps you can take to keep a healthy score:
- Offer a higher down payment so you borrow less money.
- Do not apply for any new loans or lines of credit during the home-buying process.
- Lower your debt-to-income ratio by paying off as much debt as possible before applying for a mortgage.
- Make all payments on time.
Sometimes credit reports may misreport negative events—so monitor your credit report every few months. Dispute any claims that don’t look right.
To learn your ability to qualify for a mortgage, meet with a lender to review your financial circumstances. There is no charge to consult a lender, so even if you aren’t ready to get loan approval, you may still benefit from a lender’s advice on how to prepare for a loan application.
If you’re ready to start your journey to homeownership, contact me today:
Victoria Davis, REALTOR® | Private Suite Homes, LLC at Tristar Realty, Inc. | 2441 Crain Hwy Waldorf, MD 20601 | Office: 301.358.6038 | Direct: 240.229.6467