Buying a home for the first time is so exciting! But be careful not to get carried away, and bite off a bigger financial commitment than you can chew.
I love working with clients who are getting ready to purchase property -- it's such a happy occasion, and I'm honored to be trusted to ensure that the whole experience goes as planned. I had a couple come to me in the past who had been married for just over a year, and were ready to move out of their apartment and into a house that they could raise a family in. They both worked good jobs that they had been at for over three years each, and they made sure to live within their means.
They knew that they were financially stable now, but that's not how it had always been. They both had struggled to pay off their student loans, and each had fallen behind a few times. However, the man's score was lower than either of them expected! As we went over it together, we found several reporting errors from various credit cards that stated a late payment, though he insisted he had been timely. This initial score was poor enough to raise their mortgage interest rate significantly.
The next time we met, he reported that he had gone through the entire report, and corrected each of the "late" payments that were errors. The new score was higher, and dropped their estimated interest rate into the acceptable level. They were ready to apply, and I'm happy to say, they are living in their beautiful new home!
Your credit rate plays a huge part in your experience buying property. How can you prevent these surprises when you go to buy a home?
1. Make a Schedule -- When you've made the decision to start looking for a home, make a financial calendar for yourself. Spreading out tasks will make it all seem less daunting, while ensuring that everything gets done. Items that should be included are:
o Getting copies of your credit report from all three of the major reporting agencies -- Experian, Equifax and TransUnion.
o Fix obvious mistakes on your report.
o A date to pay down your debt by.
2. Pay down your debt -- The lower your debt when you apply for a loan, the better your score, and the lower the interest rate. Having debt creates more debt, so make a plan to repay before you make a big purchase like a home.
3. Take the time you need -- If your credit is not as high as you'd like, be prepared to postpone your purchase a few months to a year. Waiting and allowing yourself time to demonstrate financial stability to raise your score will pay off for years to come.
These steps aren't going to magically make financial problems disappear, but they will put you on the right track to be ready to purchase a home without putting strain on your credit report. Even a slightly higher interest rate could mean a difference of several thousand dollars over the years it takes to pay off your property, so investing time increasing your score is well worth the wait.