Want to Buy a House? How’s Your Credit?

Credit is one of the main deciding factors in whether you will be able to buy a home and how much you will pay for it.  If you have great credit, you can get a lower rate and pay less each month on your mortgage, but a lower credit score will lead you to pay more money every month in interest.  Your credit score is a signifier to banks and mortgage companies about your trustworthiness to pay back a loan.  Want to buy a house?  How’s your credit?

If you have a score of 750 to 850, that is in the “excellent” range; a 700 to 749 score is “good” on this scale; scoring between 650 to 699 is considered “fair”; and if you are anywhere between 300 to 649 that is seen as “poor.” Scores range from 300 to 850 based on major scoring systems FICO and VantageScore.

This range shows you how far you can go up or down the scale.  While the lender ultimately determines the interest-rate, a few points on your credit score can make the decision impossible.  If you are below a certain threshold, you may not be able to secure a mortgage at all.

A high credit score is seen as an indicator that the borrower has been meeting their obligations to their creditors, paying off their cars, credit cards, rent, or other loans on time.  However, this also goes the other way.  If you have a lower credit score, it may be because you are not making these payments, or have not been able to meet your financial obligations.  If this is true, it’s much harder to make the choice to lend money.

The average credit score for 18-29-year-old Americans is 652, and the average score for 30-39 year-olds is 671. That difference can cost younger Americans thousands of dollars over the life of their loan.

Credit isn’t the only factor.  Your income, debt-to-income ratio, amount of down payment, and other factors can help you if you have a lower credit score.

You can also get an FHA loan with a lower credit score, or a VA loan if you qualify for it through your military service or that of a spouse.

Either way, the best path to homeownership is through great credit.  Start working on it today and you will see it rise.  Here’s a couple of tips.

Open credit if you haven’t.  Get a credit card and establish an official credit history.

Make your payments full and on time.  Phone bills, student loans, credit cards, car payments: it’s all the same to your credit report.

Check your reports for errors – they make mistakes too.  A credit report mistake can cost you dearly and ruin your chances to buy a home.

Call The Home Loan Expert Team in St. Louis at (314) 781-9700, Chicago at (773) 770-4727, Indianapolis at (317) 550-1515, Nashville at (615) 810-8555 or Birmingham, AL at (205)721-7656.  You can always apply online at hero.loan for your VA Loan, and www.thehomeloanexpert.com for your other mortgage needs, and we’re also open on Saturdays and will come to you to help close your loan. We work hard to make it easy on you.  Nobody gets lower rates on better loans than The Home Loan Expert, Ryan Kelley, why go anywhere else?

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