Home Ownership Part Three
Home Ownership... Are you ready?
The credit part… when it comes to buying a home the word “credit” is crucial. If you’ve managed your credit properly, you’ll be able to get the loan you need to buy your home. Here are some simple answers to some of the most common credit questions.
How can I find information about my credit history?
Your credit report and your credit score will be used by lenders to decide whether or not they will offer you a loan. Your credit report and your score also determine the terms of your loan, in other words the amount of your down payment, interest rate and length of time you will be paying back your loan. You have the right to obtain one free credit report from each of the three main credit reporting companies: Experian, Equifax and Transunion. Remember, if you find mistakes, you also have the right to dispute any inaccurate information within your credit reports. Don’t procrastinate on this. Check your credit reports early so that you can take care of any problems that might affect your loan.
I've already used my one free credit report for the year. Now What?
If you’ve already received a free copy of your credit report and want an updated version, you can buy one from each of the above companies. It’s a good idea to get one from each company to make sure that aren’t any mistakes being reported to your lender.
So, you've ordered your credit reports and you find a mistake. What steps do you need to take?
If it’s a simple mistake, those are easily fixed by writing to the reporting company, pointing out the error and providing proof of the mistake. You can also ask to add comments to your report to explain the mistake(s). Lenders are really pretty understanding if the problem or mistake was legitimate.
So how will your lender use your credit score?
Your credit score is the number based upon your credit history that your lender will use to gauge the probability that you will be able to repay the loan you’re asking for. This number is used by lenders to qualify you for a mortgage loan. The better your score, the better your chances of getting a loan and the better terms your lender will offer you. Credit scores involve a variety of factors including your prompt credit payment history, the types of credit accounts you have, how long you’ve had your accounts, how much you’ve used your credit accounts and whether or not you’ve recently tried to get any credit accounts.
What does it take to improve your credit score?
A good credit score is maintained by having a good credit history. This means paying your bills promptly and not using credit to buy more than you can afford. If you’re going to shop for a home, it’s a good idea to pay off or pay down any balances on your existing credit accounts, but keep those accounts open and avoid applying for new credit accounts.
What if you need more help to decide whether or not to buy a home? Counseling agencies throughout the country sponsored by HUD provide free or low cost advice. They will help you look closely at your unique situation and help you evaluate your home buying options.