Credit and Home Ownership

 

If you are considering the idea of purchasing a home, you should also be thinking about your credit history and present credit situation. The first step in the homebuying process is understanding your credit.

When you apply for a mortgage, lenders will review your credit report. Your credit report is a history of how you have managed your finances throughout you life.  It includes a record of the money you have borrowed, your history of paying the funds back, and how much open credit is currently available to you.

 

Your credit report follows you wherever you go and will have a big influence on whether or not you can get a mortgage, the terms of that particular loan, and the interest rate involved in that loan amount. If you have a good credit history, you may have a much wider range of mortgage options available with lower rates.

 

There is no doubt about it, owning a home is an exciting prospect. After all, you've always dreamed of having a place that you could truly call your own. But purchasing a home can be stressful, especially when you are purchasing a home for the first time. Fortunately, knowing what to expect can make it a lot easier.

 

Once you have an idea of how much of a mortgage you can afford, you will want to shop around and compare the mortgage rates and terms that various lenders offer. This is when your credit history really comes into play. When you find the right lender, find out how you can prequalify or get preapproval for a loan. Prequalifying gives you the lender's estimate of how much you can borrow and in many cases can be done over the phone, usually at no cost. Prequalification does not guarantee that the lender will grant you a loan, but it can give you a rough idea of where you stand. If you're really serious about buying, however, you'll probably want to get preapproved for a loan. Preapproval is when the lender, after verifying your income and performing a credit check, lets you know exactly how much you can borrow. This involves completing an application, revealing your financial information, and paying a fee.