Your Credit Score and How it Affects Your Ability to Buy a Home
Unless you plan to pay in cash, you'll likely require a home mortgage to purchase a home at the Lake of the Ozarks. And that means that you're going to need to get approved for that loan. In order to determine whether a lender will loan the funds to you to purchase property, they're going to look into your financial ability to pay it back - meaning they're going to be checking out your credit score to see if you're reliable or a risk. For some people, this may cause stress if they don't understand why their credit score is such an important part of the mortgage approval process. So, this week, we're sharing with you why your credit score affects your ability to buy a home and what you can do to improve yours.
What is a Credit Score?
First of all, it's important to know what exactly a credit score is and what it entails. A credit score is a statistical number that evaluates a consumer's creditworthiness and is based on credit history. Lenders use credit scores to evaluate the probability that an individual will repay his or her debts. A person's credit score ranges from 300 to 850, and the higher the score, the more financially trustworthy a person is considered to be. Five aspects typically impact your score, each varying in importance: payment history, debt-to-credit utilization, length of credit history, credit mix, and new credit.
What is an Ideal Credit Score for Buying a Home?
So, now that you know what a credit score is and what impacts your score, let's take a look at what is considered to be an ideal credit score for mortgage loan approval. The good news with this, is that there's no set in stone number or rule. Different lenders will approve with different circumstances. But a good rule of thumb, according to the Fair Isaac Corporation, is if you’re over 740, you’re in the best range for mortgages and should be able to qualify for the best interest rates. If your score is in the 700s, you should still be able to qualify for an attractive interest rate. For conventional loans, most lenders look for a credit score of at least 620, but you may have to jump through some extra hoops to get approved for the loan if your score is under 660. Bad credit or no credit doesn't necessarily disqualify you altogether from purchasing a home, but you may have to go through some pretty extensive work to get an approval, and may not get the best interest rates.
How Can You Boost Your Score Before Buying?
As a starting point, take a look at your credit report and determine where the most serious problem areas are. You'll want to start addressing those issues first. Since credit scores are often the result of having a high debt-to-credit utilization ratio, one of the best ways to improve your score is to get rid of existing debt, such as high credit card balances. If your credit card balances exceed one-third of the available credit limit, this can have a significant affect on your credit score. Work on getting those paid down and below that threshold. Another way to boost your score is to simply make your payments on time each month.
Now that you know what a credit score is, how it affects your ability to buy a home at the Lake of the Ozarks, and how you can boost your score to improve your chances of being approved for a mortgage loan, you'll be well on your way to getting yourself financially set to purchase your dream home! Once you're financially ready to buy your dream home, contact eXp Realty, the best real estate team at the Lake of the Ozarks, to start your search!
What is a Credit Score?
First of all, it's important to know what exactly a credit score is and what it entails. A credit score is a statistical number that evaluates a consumer's creditworthiness and is based on credit history. Lenders use credit scores to evaluate the probability that an individual will repay his or her debts. A person's credit score ranges from 300 to 850, and the higher the score, the more financially trustworthy a person is considered to be. Five aspects typically impact your score, each varying in importance: payment history, debt-to-credit utilization, length of credit history, credit mix, and new credit.
What is an Ideal Credit Score for Buying a Home?
So, now that you know what a credit score is and what impacts your score, let's take a look at what is considered to be an ideal credit score for mortgage loan approval. The good news with this, is that there's no set in stone number or rule. Different lenders will approve with different circumstances. But a good rule of thumb, according to the Fair Isaac Corporation, is if you’re over 740, you’re in the best range for mortgages and should be able to qualify for the best interest rates. If your score is in the 700s, you should still be able to qualify for an attractive interest rate. For conventional loans, most lenders look for a credit score of at least 620, but you may have to jump through some extra hoops to get approved for the loan if your score is under 660. Bad credit or no credit doesn't necessarily disqualify you altogether from purchasing a home, but you may have to go through some pretty extensive work to get an approval, and may not get the best interest rates.
How Can You Boost Your Score Before Buying?
As a starting point, take a look at your credit report and determine where the most serious problem areas are. You'll want to start addressing those issues first. Since credit scores are often the result of having a high debt-to-credit utilization ratio, one of the best ways to improve your score is to get rid of existing debt, such as high credit card balances. If your credit card balances exceed one-third of the available credit limit, this can have a significant affect on your credit score. Work on getting those paid down and below that threshold. Another way to boost your score is to simply make your payments on time each month.Now that you know what a credit score is, how it affects your ability to buy a home at the Lake of the Ozarks, and how you can boost your score to improve your chances of being approved for a mortgage loan, you'll be well on your way to getting yourself financially set to purchase your dream home! Once you're financially ready to buy your dream home, contact eXp Realty, the best real estate team at the Lake of the Ozarks, to start your search!
2011 REALTOR Salesperson of the Year
Missouri Association of Realtors
752 Bagnell Dam Blvd., Suite A
Lake Ozark, MO 65049
Office | 573.365.1555
Fax | 573.365.1766
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