to buy, where do I start?
Start with Your Credit!
When you look for a mortgage, lenders will review your credit report. Your
credit report is a history of how you have managed your finances and repaid
debt. It provides information on money you have borrowed and a history of your
payments. If you need a referral to a reputable lender, let us know and we can
Your credit history is pulled together into a credit report by three private
companies: Equifax, Experian and Trans Union. These companies sell your credit
report to banks and other creditors so they can review mortgage and loan
Your credit report includes:
- A list of debts, such as
credit cards and car loans, and a history of how you have paid them.
- Any bills that have been referred
to a collection agency. This can include items like phone and medical
- Public record information,
such as tax liens or bankruptcies, even if these have happened several
- Inquiries made about your
creditworthiness. An inquiry is made when you request credit. Many times
your report will also show if you were given credit based on the inquiry.
Most of the information in your credit report is deleted after 7 years (a
bankruptcy is deleted after 10 years) and is continuously updated to reflect
the latest information.
It's important that you look at your credit reports from each of the three
companies to make sure they are correct. Your credit report may vary from one
company to the other.
Your Credit Score
When you apply for a mortgage, the lender may request a credit score as well
as a credit report. A credit score is a computer-generated number that
indicates your ability and willingness to repay a debt based on your credit
Your credit score is part of the mortgage information that will decide if
your application is approved. Your credit score may also be used to determine
the mortgage interest rate.
Start Building Your Credit
Building good credit doesn't have to be difficult. Follow these tips and
you're on your way:
- Pay Your Bills on Time. How
you've paid your bills in the past can indicate how you'll pay in the
future. Credit scores emphasize your most recent payment record so if
you've been late, start paying on time!
- Pay at Least the Minimum
Amount Required. You can always pay more, but you should never pay less.
- Keep Credit Card Balances
Low. Don't "max out" your credit cards.
- Don't Apply for Too Many
Loans or New Accounts. Requesting a lot of credit in a short time span may
concern lenders that you won't manage your debt well.
- Establish Credit if You Have
- Apply for one or two credit
cards. Use the cards carefully and pay them off each month.
Make a Budget and Live Within It!
A budget will help you meet your monthly bills, and therefore help your
credit. It also can help increase your savings for things like a down payment
on a house.
Demonstrating your ability to save and having funds on hand will help you in
the mortgage approval process. Your personal savings should be sufficient to
last several months should you lose your job or source of income.