Credit & Home Loans
Wise Tips For Home Buyers
Looking To Buy A Home?
As you prepare to move into the next stage of your life, homeownership, you’ll start thinking about your credit score. Talk to a home loan specialist at your bank first. They have the most accurate financial information pertinent to your situation and will most likely speak to you honestly and openly about your credit needs.
What’s A Good Score?
A good credit score, which would almost guarantee you a home loan, is 760 or greater. This number may move up or down marginally depending on the markets. In general, though, mid-700’s and above will pretty much secure you a home loan.
If you’re worried about having a credit score in the mid-700’s, there are other ways of securing a home loan with lower credit scores.
To qualify for a Conventional Home Loan you will need a minimum credit score of 620. Most lenders will follow this baseline credit score, but other factors may help or hinder the qualification process. Consider saving a minimum of 6% down for the home you’re looking to purchase. Ensure your credit cards and loans are paid on time for a solid year or more. The amount of your other credit lines will impact your qualification as well.
Where Conventional Home Loans require higher down payments, you may be interested in qualifying for an FHA Home Loan. These are loans funded by the Federal Housing Administration and ask for lower down payments (as low as 3.5%) with a credit score minimum of 580. These loans may also come with certain stipulations, depending on your lender.
FHA Loans also provide home loans for credit scores of 500 and above, but the stipulations are very guided. You have to address all of your outstanding debts, liens, collections or judgments. You will also be required to have 10% or more for your down payment. There may be a timeframe in which to prove your commitment, during which your credit score may start to rise.
Suffice it to say, if your credit score is below 500 you’re pretty sure it’s not a “Good” score. If you’re in the market for a different living situation, trying to buy a condominium or home, start by addressing your finances and seeing where you can aid your credit score.
Helping Your Credit Score.
There are many ways to improve your credit score, especially if you’re in the low 500’s. A lot of these suggestions can also help people who have mid- to high-700 credit scores.
- Take Care of Outstanding Debts. Check your Credit Report to see if you have any outstanding debts, credits, loans, judgments or liens that may be affecting your credit score. You can go to your banker, or get an in-depth credit report from many of the credit reporting companies like Experian, TransUnion, or Equifax. Once you have the report you’ll see the positive and negative influences on your credit and be able to address the accordingly.
- Reduce Your Credit Balance. Try to bring your credit card balances quickly. The revolving credit with high interest rates have a larger impact on your credit score than you may think. Try to bring those balances below 40% of your credit limit and continue to pay on time.
- Increase Your Credit Availability. If you don’t have a credit card, or only have one or two with a long life, open another credit card and start using it. Make sure to keep your balance around or below 40% in order to help your credit score. Maxing out your credit card each month does not look good to lenders.
- Have Money In Your Bank Account. As you start saving up for your next home, make sure to keep a healthy balance in your Savings Account. If your bank sees a large, healthy balance over a long time in your account, they will be more willing to authorize a home loan. Try to have 6-10% of your down payment aging in your savings account.
Securing Your Loan.
When it’s time to really secure your home loan, start by talking to your banker. They will give you an honest, in depth analysis of your credit history. You can also check with other home loan lenders in your area. In Longmont, Colorado, you have several options:
- Home Loan Mortgage
- Caliber Home Loans
- Nesting Home Lending, LLC
- Inspired Waves Home Loans, LLC
- First Colorado Mortgage Loans
And many more, including local and national banks in the area. Each lender will have slightly different expectations when it comes to your credit score, credit history, and home loan needs.
Finding Your Dream Home.
Whether or not you have your loan secured, you can always shop around for your Dream Home. Speaking with a Real Estate Agent about local markets can help steer you in the right direction, especially if you know your credit score. Get in touch with The Wise Team today. We’ll introduce you to the neighborhood and all the best lenders in town!