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What Credit Score Do You Need to Buy a House?

May 22, 2022

When it comes to purchasing major-ticket items such as cars and houses, you’re going to need to know your credit score. This impacts the interest rate you’ll pay on your loan and the better the score, the lower the interest rate. There are plenty of ways to check your credit score, and it’s important to know your own score so that you have time to fix it, if necessary, before you actually need it. If you have questions about whether you can likely buy a home with your score, real estate agents in Auburn AL will be able to help you figure out what you’ll be likely to afford.

At least a year before you start considering buying a home, you should check your credit score. In fact, you should check it annually to make sure there are no mistakes so that you can have them easily fixed. It also helps you understand if you’re in the range to get a good mortgage rate. Credit scores range from 300 to 850, with 850 being a perfect credit score. If your score is anywhere between 750 and 850, you’re ideally suited to get the best rate. That’s an excellent score. That can be difficult to attain sometimes, but a good score is from 700 to 749. From there, you’re getting into more difficulty; a fair score is 650-699, but anything below 650 is considered poor and likely to cause problems when you apply for a loan of any kind.

Lenders feel more comfortable giving loans to people with excellent and good scores and are likely to recognize you as someone who pays bills on time and is trustworthy. They’ll also likely offer you lower interest rates to get your business. You can still get a loan with lower credit scores, but you’re going to be viewed as a risk and you’re likely to pay much higher interest rates, cutting down on the amount of home you can afford.

The reason you should stay up to date on your credit score is because it’s not the kind of thing you can fix overnight. Excess debt, late payments, the type of credit you’ve had, and the length of time you’ve had credit all get factored into your score and it takes time to show consistent improvement. Do not open new credit lines during the period immediately before or during your search for a new home, though. This makes lenders worry.

You can get free annual credit reports from websites like CreditKarma and AnnualCreditReport. The main credit-reporting agencies – Experian, Equifax, and TransUnion – may charge a fee. However, they’re the ones who send in all the data – even one late car payment five years ago – to create your FICO score, which is the summation of your overall credit score. If you can prove errors, do so, in order to improve your score. Otherwise, make sure you pay bills on time. You don’t have to pay off all debt, but make sure you have an acceptable debt to income ratio.

It’s worthwhile to talk to different lenders and your real estate agents in Auburn AL may be able to suggest various lenders who may be willing to work with you if your score isn’t ideal, and they may be able to suggest lenders who will be particularly generous if you do have an excellent score. So learn your score, keep working to get into that excellent range, and you’ll be able to afford an even nicer home, especially with the help of Erickson Realty.

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This post was written by Rose Anne Erickson

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