Jump Start Your Home Purchase with Strong Credit
- Minhua Gu
- Aug 4, 2020
- 2 min read
Having a good credit will open you many doors in everyday life. You can enjoy perks of credit cards and get better financing terms when you buy a car. When you want to rent a home, the property management company or the landlord often favor your application because of your excellent credit score. Sterling credit history and score comes even more handy when you apply for a mortgage to finance your home purchase.
Understanding the strengths or challenges of your credit history is one of many reasons why it is extremely important to start the pre-approval process before you shop for home. Granted, going through the pre-approval process lets you know what home price you can afford. In addition, an experienced loan officer can shed light on your credit score and create an action plan for you to improve your credit in order to get mortgage approved or have better borrowing terms including lower interest rate. The mortgage lender review the 4Cs when deciding how risky or not it is to lend someone money: 1) credit history and score; 2) collateral (the home you are purchasing); 3) cash (your down payment); 4) capacity (the debt you can carry versus your income). As many of us already carry car loans, student loans, and credit card debts, having a good credit score can balance out some risk factors.
My lender friend, Mohammad, and I recently had a conversation about how to build a strong credit history and score. Late payment, collections, and exhausting your credit line are the top three "killers" of a good credit score. When you carry different debts and also want to borrow to buy a home, it is not always clear-cut what debt to tackle first. A loan officer can help you decide which payment to make first in order to have the loan approved. Mortgage lenders also like to see the borrower with at least two credit lines and have been paying for these credit lines for the last twelve months. Most importantly, it is always better to start the conversation and know the road map ahead of you. You can watch the full video on my Youtube channel.
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