Are you a first time home buyer looking to apply for a mortgage to buy a house? As a homebuyer, you need to understand that your credit score will play a vital role in getting a significant mortgage on the house you intend to buy. Well, the better your credit score is, the higher the possibility of scoring a big mortgage.
What Is a Credit Score?
A credit score is the measure of your credit worthiness. What does this mean? Lenders use your financial history especially your credit records to determine whether they can provide you with a loan or not. They check how long you had credit before, your credit-to-debt ratio, payment history, types of credits you carry and how much credit you are applying for. Credits they look for include students’ loans, car loans, personal lines of credit, and credit cards.
Many real estate agents suggest that you need to first increase your credit score before you apply for a mortgage to stand a better chance of getting bigger loans for your house. Having a higher credit score attracts several offers from different lenders, all contending for your attention. Your main goal when applying for mortgage is to obtain the best interest rates possible.
How You Can Raise Your Credit Score
People end up with bad credit scores because they are undisciplined when it comes to managing their money. When you cannot manage money well, you are unable to make your credit payments on time which affects your credit score. When one has a low credit score, chances of getting a mortgage become slim or a borrower is forced by lenders to rely on high interest loans. However, the good news is that a bad credit score can easily be repaired. How can this be achieved?
Pay Off Your Previous Loans First
To improve your credit score, you can start by paying off any loans you have at the moment. Whether you have a student loan or a car loan, you can plan on how to pay for these loans ahead of time. If you are having a problem paying your loans on time, go back and check your monthly expenses and determine what you can cut off to allow you to save more money. If you find there are things that you spend money on that you don’t really need, you can cut off these expenses and use the money to pay off your loans.
Minimize Your Credit Card Utilization
Without proper discipline, it is very tempting to utilize your credit card to the maximum. If you are already struggling in paying off your credit card loans, try to minimize your credit card usage. You should set a limit of not more than 30% on credit card spending. For example, if your credit card maximum is $10,000, never spend more than $3,000 every month. This will not only allow you to make smaller loan payments but also improve your credit score with time.
Seek Help From A Professional Real Estate Agent Before Applying For a Mortgage
To get more information about scoring a bigger mortgage for your house, talk to a professional real estate agent. Realtors already know so much about mortgage applications in your area and they will guide you on how to go about it. They can recommend top lenders they work with to help you get the best interest rates on your mortgage. To help you come up with a mortgage amount you want, check the property listings in your area to have an estimate of how much you need to buy a house.