4 Credit Tips Every Home Buyer Should Follow Before Starting Their Search
Now is the perfect time for people who are in the market to buy a house. Home prices are at an all-time low and interest rates are perfect for people with good credit. There are some simple credit tips you need to do before you start applying for mortgages.
1. As soon as you decide to purchase a home, you need to pull your credit reports and find out what your current credit score is. Give yourself about 6 months to review the reports and remove any incorrect information. Making simple changes to your reports can not only help boost your overall credit score but also help you get a better interest rate for your mortgage. If your score is low, you may need to hold off on searching for a home to give yourself time to fix your credit and pay off any outstanding debts.
The housing market and interest rates are not going to be changing anytime soon and you want to have the best credit score possible when applying for mortgages because it can save you thousands of dollars in the long run.
2. Pay down or off as much of your credit card debt as you possibly can. You want to increase your available credit and reduce the amount of unsecured debt. Try to limit the amount of balances you have outstanding. You do not want to have 7 credit cards and a balance on each account. This will look bad to most mortgage companies and can ultimately get your application denied regardless of your payment record.
After you pay off any balance, be sure to keep these accounts open. Closing accounts can hurt your overall credit score. You also do not want to apply for any new credit card accounts because credit inquiries will also reduce your overall score.
3. After you have increased your credit score, you should start applying for mortgages. You want to make sure to apply for these within the same time period because remember each inquiry will lower your score; however, if each application is reviewed at about the same time, then each application should get about the same score.
4. You need to maintain good credit throughout your home buying process. Even though you may get pre-approval for a loan, your credit will be checked several times before your actual closing. Do not ruin your chances at purchasing a home by messing up at the very end.
At the end of the day, keep your overall debt low and wait to apply for any other credit accounts while you are searching for your home. This is the key to getting your mortgage application approved and the lowest interest possible.
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