Pam & Beth's Real Estate News January 2018
(650) 347-5673   |   www.kleebauerproperties.com   |   info@kleebauerproperties.com
House Hunting and Credit: What You Need to Know
Courtesy of Brandpoint

By now it is something of a cliché to call homeownership the American dream. But even if sitting on your own deck, looking over a picket fence, and sipping lemonade doesn't move you, homeownership is still one of the best ways to build wealth.

For many people, owning a home is cheaper than renting and in the long run the biggest investment they will ever make. It is also a practical financial move thanks to the fact that you're likely building equity.

So, although it is perfectly fine to dream about backyard barbecues and the smell of fresh-cut grass, the path to owning your own home should also involve taking the time to do some financial sightseeing.

As a leader in creating credit scoring models, VantageScore Solutions has made it a priority to educate consumers on the important role a good credit history plays in buying a home.

Whether you're about to buy your first home or getting ready to sell and buy another one, here are the basics of how credit impacts the home-buying process.

The Basics
If you are like most people, you will probably need to take out a loan. If you are able to pay cash for your home instead, count yourself among the lucky few!

A huge part of taking out a loan involves your credit history and credit score. Basically, you must prove to lenders that you can be a responsible borrower and can be trusted with a mortgage of thousands of dollars. A strong credit score can provide proof of this trustworthiness.

Different types of loans have different credit requirements. Some loans require you to have a credit score of at least 620, although it is possible (with some difficulty) to be approved for a loan with a credit score as low as 580. But getting loan approval is only part of the story.

Better Credit, Better Rate
Home loans come in all shapes and sizes. Some are fixed-interest mortgages, some have adjustable rates or longer terms, and the list of variables goes on. Just like anything else, some loans are better for you than others. To get the loan that has the lowest interest rate, which right now is around 4 percent, usually requires a higher credit score. Rates can be considerably higher when you have a lower credit score, and the result is paying significantly more monthly over the life of the loan.

The reason is that a higher credit score demonstrates that you are skilled at managing debt and have a history of responsibly paying back many types of loans. Therefore, the lender is taking on less risk when lending you money. The less risk for them, the better the interest rate for you.

While there are, of course, more nuances to the process, your credit score plays an instrumental role in determining the type of loan you may qualify for. Therefore, before you go to your first open house, check your credit score to better understand the factors that typically impact your score. Many websites provide free access to your VantageScore, which is a perfectly fine barometer to use to directionally gauge your creditworthiness. Mortgage lenders use FICO scores in their underwriting.

Knowing your credit history and understanding the factors that could impact your credit score will help you plan, budget, and come up with a realistic wish list for your house.

For more ways to stay on top of your credit score go to your.vantagescore.com.

Beth Taylor & Pam Shaffer -  (650) 347-5673 Pam & Beth's Real Estate News  -  January 2018

Pam Shaffer and Beth Taylor, Kleebauer Properties, 1325 Howard Ave. Suite 324 , Burlingame CA 94010
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The material in this publication is provided for your informational purpose only and is not intended to substitute professional advice.
If your property is currently listed with a Real Estate Broker, this publication is not intended as a solicitation.
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