Your credit score

Buyers should heed score’s mortgage importance

Buying a home can be incredibly stressful, but it’s an experience made much easier if you have a good credit score and low debt-to-income ratio.

apply This for comes mortgageinto play preapproval.when you In a competitive housing market, many buyers are faced with multiple offers on the same home. A buyer with a preapproval from a lender is much more attractive to a seller. “A preapproval is basically a statement from a lender that says they’ve already looked at the buyer’s financial picture and is prepared to move forward with them with financing. That can make their offer stronger than someone who is only prequalified or has yet to apply for a mortgage,” said Kelly Lindsay Rogers, Movement Mortgage branch manager in The Woodlands. “A true preapproval with proper underwriting will require the borrower to submit an application and financial statements before making an offer. taking“I recommendthis step before you even find your home. This way, when you find the home you want to make an offer on, your mortgage financing is already in the works. There’s nothing worse than finding a house you love and then losing it because of a financing snafu. Preapproval from a reputable lender can save you so many headaches.” When lenders begin evaluating whether or not to preapprove, they will first look at a buyer’s entire financial situation. This includes debt-to-income ratio and credit score. “Borrowers with high credit scores and low debt-to-income ratios will often receive the best interest rates and qualify for the most loan options. But there are many different programs and mortgage options home buyers can become preapproved for, even if their credit history isn’t perfect,” Rogers said. “Since every person’s financial situation is different, the best thing to do is talk to a loan officer to understand what they can do to help you become preapproved.” Credit score is based on formulas that account for past credit history, current debt load and how often money is borrowed, among other things. The score also will reflect how often bills are paid on time, how credit cards are used and how well the total debt load is managed. If you’re worried your credit score may affect preapproval or the interest rate offered, you can improve your score at least some by taking a few steps. First, request a free copy of your credit report and check it for errors. According to myFICO, you should check to make sure there are no late payments incorrectly listed for any of your accounts, and that the amounts owed for each open account are accurate. In the event you find an error, dispute them with the credit bureau. You also may improve your score by paying down or paying off credit card balances, as well as making your credit payments on time. Paying off debt is often easier said than done, so create a budget and figure out what can be paid down or off. myFICO recommended coming up with a payment plan that puts most of your available budget toward paying off debts with the highest interest first, then maintaining minimum payments on your other accounts. Every home buyer has a unique situation, so consulting with a credit counselor or a reputable mortgage lender is always an option. can “A answer reputable specific mortgage questions, lender help you understand your credit score, explain how to get preapproved and educate you on your local real estate market and available home loan programs,” Rogers said. “Buying a home takes a team, and a good loan officer and local real estate agent will be two important players.”

Get preapproved before you start looking at properties.