Step 1: Know Your Creditworthiness
Your credit history plays an important role in your ability to
get a home loan and a good interest rate. When you apply for a mortgage
pre-approval or mortgage loan, your lender will order a copy of
your credit report to evaluate your credit history and determine
your creditworthiness. This report includes a record of your debts
and your repayment history with creditors who've loaned you money,
such as credit card companies, banks, and department stores. It
shows whether you pay bills on time and whether you pay the proper
amounts due. Your credit history gives a lender an idea of how well
you handle your credit, both now and in the past, as well as how
much money you owe. Therefore, before getting pre-approved or applying
for a mortgage loan, you may want to order your own copy of your
credit report from one of the three major credit bureaus. This way
you can check it in advance to make sure it is accurate. It also
gives you time to make any corrections that may be needed.
If your credit history isn't perfect, don't think you can't qualify
for a home loan. Today lenders offer a variety of loan options that
require very low down payments and have flexible payment, credit,
and income qualification guidelines. Everyone who has a credit history
also has a credit score. The credit score is based on all the information
in your credit report. Race, age, religion, national origin, marital
status, gender, income, and where you live are not used to
calculate your credit score.
The credit score is related to the rate of interest lenders may
charge on loans. Generally, a higher credit score results in a better
(lower) interest rate. A lower interest rate, in turn, results in
more affordable monthly mortgage payments. However, you should keep
in mind that your credit score is just one of several factors that
will be used to evaluate your mortgage loan application and to determine
the interest rate in which you qualify.
Related Articles for Step 1
- How to Establish Your Credit History
- How to Order Your Credit Report
- How to Check Your Credit Report and Correct Errors
- How to Repair a Poor Credit Rating and Maintain Good Credit
|
