Prepping Your Credit to Buy a Home in 2018

prepping your credit

25 Jan Prepping Your Credit to Buy a Home in 2018

Are you planning to buy a luxury home in Summit County this year? You’re not alone! Lots of people are trying to decide if now is the right time to leap into homeownership. Buying a home has a ton of perks, including tax benefits and the opportunity to build equity, making it a dream for many people. You’ve saved for a down payment, organized your pay stubs and bank information, and even set money aside for emergency repairs. The next step towards buying your dream home: prepping your credit.

Why is good credit so important?

If this year is anything like 2017, buyers will have to be really strategic with how they approach the housing market. December closed out with just 77 luxury homes for sale in Summit County. In other words, inventory was really low. When you and a bunch of other buyers are clamoring over the same properties, it’s crucial to have a pre-approval letter from your lender to be competitive.

There are many factors that determine your ability to get a mortgage, like how much debt you have and your employment history. However, your credit score is a really big one. In fact, your credit score is the first thing a lender will look at when checking to see if you qualify for a mortgage. That three-digit number can make a huge difference in what type of loan you can get, as well as your interest rate.

Some quick facts:

  • Most homebuyers have a credit score between 680 and 739.
  • To qualify for a conventional mortgage you’ll need at least a 620.
  • For the best interest rate you’ll need a credit score of 740 or higher.

When’s the last time you checked your credit score? If the answer is “Never” or “I don’t remember,” it’s time to get cracking – especially if you’re afraid to look. While there’s no quick fix for improving your credit score, there are some important things you can do right now to see some gradual gains over time.

Prepping Your Credit to Buy a Home in 2018

1. Review your credit report

You are entitled to one free copy of your credit report every year. Pull your credit report from all three major credit-reporting agencies (Equifax®, Experian®, and TransUnion®) to make sure there are no inaccuracies. You can also keep tabs on your credit score with a service like Mint.com or CreditKarma.com.

2. Dispute inaccuracies

If you see any mistakes on your credit report, it’s crucial to file a dispute with the credit-reporting agency. Look for unpaid bills you’ve actually paid, or if there’s an account showing up that you didn’t open.

3. Have multiple lines of credit

Good credit must be earned. Your credit score might be low simply because you don’t have anything to show. Conventional loans require applicants to have at least three lines of credit that have been active for one to two years. If necessary, open a major credit card, like a Visa or Mastercard, at least six months prior to applying for a mortgage. Use it to pay for everyday expenses and pay it off in full before your bill is due.

4. Don’t cancel old credit cards

If you’re like us, you opened your first credit card in college to pay for textbooks. Flash forward way too many years and that card is collecting dust in your desk drawer. You may not use them any longer, but these old lines of credit help boost your credit score. You don’t have to use them, but don’t cancel them either.

5. Pay off as much debt as possible

Prepping your credit to buy a home involves taking an honest look at your debt and tackling it head on. It’s unavoidable; lenders will look at your debt-to-income ratio when determining your mortgage rate. Paying off debt, along with making payments on time, is the quickest way to improve your credit score and nab that home of your dreams.

Will you buy a home in Summit County this year?

We get it. Prepping your credit isn’t the most exciting part about buying a new house. However, the sooner you start, the better your chances of getting pre-approved for a mortgage and securing your dream home. When you’re ready to begin your search, give us a call. At Dwell Summit, we’re passionate about the Summit County lifestyle and we’d love to match you with a property that feels like home!

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