Arranging Financing

Financing and Your Credit Score

Financing is key and an important factor to consider when you are looking at your dream home. By knowing how to arrange financing, and how much you can afford, you can avoid spending time looking at (and potentially falling in love with) houses/property that is outside of your price range. Here are some tips to help you get this process started.

Get Pre-Approved

A Mortgage Pre-Approval is a document from your bank or other lender stating how much of a mortgage they are willing to give to you. By getting this before you start looking at houses, you can have peace-of-mind knowing that you can afford the homes you are looking at, and won’t have problems arranging financing when you find the property you like. It also signals to sellers that you are serious and prepared, which will give you an edge when making an offer.

You can get a Pre-Approval with your bank, other lender, or by working with a mortgage broker. Knowing the area, we are connected to many local reputable brokers or lenders to connect you with!

How Much Home Can You Afford and How Your Credit Score Affects You

Banks, lenders, and mortgage brokers use specific criteria to determine how much of a mortgage they are willing to offer you. Among the list of criteria is your income, expenses, credit history, and employment status- as well as how much of a down payment you are planning on making. While this sounds like a large process, you can usually get a Mortgage Pre-Approval in a day.

It is also important to understand how your credit score affects your ability to finance a home. In order to make it easy for mortgage companies to determine the risk of lending to you, they are using a system called credit scoring (also called “FICO” scores).

When lenders look at your credit report, they can instantly see how much debt you have, how reliable you are with bill payments, and if you’ve had any bankruptcies within the last several years.

With your credit report, lenders get a “credit score” which takes all of this information and boils it down to a number between 300 and 900. The higher the number, the less of a credit risk you are seen to be, and this is how lenders decide which types of loans you will be eligible for. As with all new things, there is controversy over credit scores.

To be eligible for some types of loans, you require a minimum credit score without any exceptions. And credit scores fluctuate over time. In fact, the mere act of applying for credit can lower your credit score.

 

How to Make Sure You Have the Highest Credit Score Possible

To maximize your credit score, you should avoid applying for any new credit cards or consumer loans. Don’t go to the discount store and take them up on the “No interest, no payments for one year” offer — and avoid financing a car! After you buy your home and get your mortgage you can do all of these things, but before then it’s a bad idea. Buying things on credit hurts your credit score, and leaves less money for your downpayment. Lenders also look at this figure to decide how much money they will lend you, and how much interest they will charge you on the loan. That’s why it’s best to wait until after you’ve bought your home to go shopping for furniture and appliances. There is also another reason to wait…

Once you’ve bought your home, you can get a loan for up to 100% of your home’s value to buy anything you want.

If you learn to play by the rules of the lenders’ game, you can get the best credit score possible, which improves the odds that you can get the home of your dreams.

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If you have any questions about arranging financing, or wish for us to get you in contact with a local Mortgage Broker, please call us, email us, or fill out the form below and we will get back to you quickly.


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