3 things to know about credit when buying a home
Happy Financial Literacy Month! Every homebuying journey involves plenty of talk about money, especially if you’re in the market for your first home. The good news is there are plenty of people ready to help guide you on this adventure and make your homeownership dreams come true. (Shoutout to all our loan officers out there!)
For anyone needing a mortgage, credit will play a large role in your buying power. However, that doesn’t mean you won’t ever be able to purchase a house if you don’t have perfect credit, or plenty of cash in hand. Instead, you just need to be well-informed and adjust your approach to make things work. If you are planning to buy a home, here are three things you need to know about credit before you make your purchase.
Know your credit score and what it means.
Many people feel stuck with renting because they believe their credit disqualifies them from getting a loan, but sometimes, this is just an assumption. If you have a low credit score or bad credit history (or no history), don’t fret. You can clean it up. While this does involve actively making payments in full and on time, there is more to it than that — having an accurate credit report matters.
Look at it and if there is any inaccurate information, work on getting it removed. You can do this yourself with the assistance of free programs like Experian Boost in addition to paid options that could benefit you.
Don’t let a credit score stop you.
We should always strive to improve, but here’s the deal: Perfect credit isn’t necessary to buy a home. Of course, a solid credit history helps, but there are other options available to those who have lower credit scores. Ultimately, having better credit means a lower mortgage rate. However, various loans are often available if you are willing to pay a slightly higher rate.
Having money for a down payment still matters.
It’s important to understand the importance – and the flexibility of a down payment. While the traditional 20 percent is not needed in most cases, having money for a down payment is still important. (In 2021, the average down payment was 7% for first-time homebuyers and 17% for repeat buyers.) It’s important to save money for this endeavor, no matter what your initial money expenditure turns out to be.
Many programs are out there to help people interested in buying a home, especially first-time homebuyers. Be sure to look for programs available at all levels, from local to state to federal, and from both the government and private sectors.
The bottom line is if you think you’re ready to buy a home, it’s important to have your finances in order and then choose the right real estate professionals to help you each step of the way. Our teams are ready to be your title and closing provider whenever you need us.