Homebuying 101: Credit

Home Buying

Are you currently shopping around for a home? Or, is that something you plan to do in the future? If you’ve answered yes to either question you may wonder, “Where do I start?”

A good rule of thumb at the beginning the home buying process is to explore your financing options with a mortgage professional. There are various factors that impact your ability to qualify for a home loan, and what you qualify for can impact your ability to purchase. Finding out what’s realistic for your personal situation could help you find a dream property that’s within reach.

One qualification factor you may hear a lot about is credit which is important to understand. We’re going to take a closer look at what it is from a homeownership journey lens.

What’s my credit report and credit score?

Your credit report is a document that contains your personal information (such as name, birthday, and social security number) as well as an overview of your credit history (open and closed accounts, inquiries, adverse actions, and other factors).

Your credit score is a three-digit number generated by an algorithm that uses information in your credit report. Credit scores can range from 300-850 with higher numbers representing better credit.

Overall, your credit report and credit score make up your credit profile.

How can I view my credit profile?

There are various no-cost resources you can utilize to access your credit report and credit score.

Under federal law, everyone is entitled to one free credit report a year from each nationwide credit bureau: Equifax, Experian, and TransUnion. These reports do not show credit scores, however some websites allow you to view your credit score for free or sometimes your credit card company will provide a free credit score as part of your membership.

Obtaining and reviewing this information will give you an overall picture of where your credit stands.

How does my credit profile impact home financing options?

When you meet with a mortgage professional, they’ll use your credit profile to help calculate interest rates, determine how much home you can comfortably afford, and identify what loan programs are available to you. Credit requirements can differ between programs.

Typically, the better your credit score the better the pricing available to you on a number of things including the interest rate/discount points charged on a home loan. A lower score or derogatory report may result in higher interest rates, which could mean you pay more in the long run.

How do I improve my credit score?

General guidance when shopping for a home is to avoid opening new accounts or skipping payments, and to continue paying down any balances. You also want to keep an eye out for any instances of fraud or inaccuracies and report them as quickly as possible. It can take up to 90 days to correct an error on your credit report, so the sooner you report it the better.

If you have more questions about your credit, consider consulting with a reputable credit counselor for guidance. To learn more about your home financing options, contact an Evergreen Home Loans™ loan officer today.

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