Buying #3: Checking your credit
You’ve determined that you have a strong motivation to buy a house. You know how much monthly payment you can comfortably afford.
The next step is to check your credit. Most loan programs are FICO driven. This means the kind of loan, rates, and fees that you can obtain depends on your FICO score on your credit report. A FICO score generally ranges from 300 to 850. The higher the score, the better your credit. If your score falls below 660, you will have to consider getting a subprime loan instead of a A-paper loan. Subprime loans costs more and usually have a prepayment penalty feature.
It is a good idea to check your credit before you begin shopping for a house. In case there are any surprises on your credit report, you will want to take care of it before you actually apply for a loan. There could be mistakes on the credit report. If your name is a common one, another person’s credit could have been reported on yours. There could be misreporting, or perhaps loans that are paid off were not reported. You should take the time and effort to repair any errors.
If you have any outstanding collection accounts, it is a good idea to pay those off. It will help your credit score. When it comes to getting a home loan, the lender will require you to pay it off anyway.
Your credit score makes a big difference in loan options available to you.
It’s not the only factor in qualifying for a loan, however. How do you quality for a loan? When does this lead to determining the price to shop for? Read on to find out!
Want to jump quickly to the other Buying posts? Here’s an index to help you out.
#1: Getting ready to buy
#2: Looking at finances
#3: Checking your credit
#4: Qualifying for a loan
#5: Determining the price to shop for
#6: Finding the location
#7: Proximity to your workplace
#8: Choosing your agent
#9: Cautions in the search
#10: Moving into your new home