The First Step to Buying a Home: Repair Your Credit
The First Step to Buying a Home: Repair Your Credit
Many people will tell you that the first step to buying a home is to save for your down payment, or to make sure that you have scouted out the area you wish to buy in. Those are both very important factors in your decision to purchase a home but in reality, the first step to buying a home is to repair your credit. Most people do not intend to buy their home without taking a mortgage out on the house. For that reason, anyone who decided to buy a house will have to apply for the mortgage loan from a bank. When the person goes to the bank to apply for the mortgage the bank will pull their credit report and see their credit score. Based on the person's credit score, the bank will determine if they are willing to extend credit, and if they are, at what interest rate. A high credit score will generally results in a low interest rate and a low credit score will end in a high interest rate, if the bank is willing to lend to you at all.
Someone who has bad credit for any number of reasons will have a difficult time finding a bank that will agree to lend them enough money to buy a house. If a bank does decide to lend them the money they will raise the interest rate so high that the person will be paying a lot more interest than they would with a much lower interest rate. Once the mortgage application has been submitted it is too late to repair a credit score. Repairing a credit score takes months and sometimes years depending on the state of the credit score and what factors have gone in to making the score less than it could be. When a person makes the decision to buy their home and apply for a mortgage they will need to allow for enough time for their credit report to fix itself before they begin the mortgage application process.
If a person is serious about repairing their damaged credit score then they will need to make sure that all of their current loan payments are up to date. Having late payments on a credit report is the most destructive piece of a credit score. Once the loan payments are up to date a person should make sure that their debt levels are well below their credit maximums. This means that a maxed out credit card is a bad sign for a lender and a negative impact on a credit score. Simply paying down the balance on a credit score could have a big positive effect on a credit score.
A person looking to repair their credit score should also make sure that they have not had multiple hard hits on their credit report in the last year. A lender will see this as a sign of "credit shopping" and will be unwilling to negotiate with that person. All of these steps should allow a mortgage applicant to qualify for a low interest rate.