How Credit Reports And Scoring Affect How Much House You Can Buy

Simply put, a credit score reflects how you pay your bills.  Having good to excellent credit is essential in the home buying process.  Please understand that just because you have good credit, doesn't mean you qualify automatically to get a loan for a house.  Here's what you need to know.

There is a buzzword in the mortgage industry.  Actually it's two words . . . Credit Scoring.

In their never-ending search to find an easier way to rate a person's financial ability, mortgage companies use a system called credit scoring (also called FICO scores).  When lenders pull up your credit report they can look at all of the debts you have, how much you owe, how well you make your payments, and many other things (like bankruptcies and loans) you've had within the last several years.

With your credit report, lenders now get a credit score which takes all of your information and creates a credit score for you.  Your credit score is the number lenders use to decide which types of loans you will be eligible for.  Some types of loans require that you have a certain credit score to get the loan -- no exceptions.  Credit scores change over time.  As a matter of fact, just applying for credit can lower your credit score.

Now that you know what a credit score is, here's how to make sure you have the best one possible.

First of all, don't apply for any new credit cards or consumer loans.  Don't go down to the furniture store and take them up on the no interest, no payments, no nothing for one year financing program.  And, don't go out and finance a car.  You can do all of these things after you buy your house and get your mortgage, but don't do it before. 

Lenders also look at this figure to determine how much interest they will charge you.  So wait until after you've bought your home and have moved in to get that new couch or big screen TV.  

To learn more helpful tips or to find out more about what CENTURY 21 Semiao & Associates can do for you, Contact Us!