Manage Credit Score to Get Your Dream Home

Credit Score Management

Your credit score is crucial in doing lots of things in life. Buying a home is a major life choice, and getting your credit approved is an important part of the process. But do you know how long it takes to prepare your credit for a home purchase? If not, then this is for you. We’ll go through how to get your credit in line and what actions you need to take before buying your first house.

Manage Your Credit Score
Managing Credit Score

Homebuying and Your Credit Score

Understanding your credit rating or score is critical when buying a home. This score is based on how often you pay your bills on time and whether or not you have any outstanding debts. A good credit score might help you get a reduced interest rate on a mortgage, whereas a poor credit score can make it difficult to get approved for one. Credit scores range from 300 to 850, with 300 being the lowest and 850 being the best. Payment history, total balances, and outstanding debts are among the elements that go into determining your credit score. The better your credit score, the easier it is to purchase a property.

The minimum credit score required to buy a house or get a loan is usually between 600 and 680, with the average credit score hovering around 750. When you apply for a mortgage, lenders will check your FICO score, and if it goes below 680, you may have to negotiate your interest rate and payment options with the lender. When it comes to buying a home, the worse your credit score, the higher your interest rates will be. For example, if you have bad credit, you may only be eligible for a 5% interest rate, whereas someone with good credit may be qualified for a 3% interest rate.

Manage Your Credit

Many people want to buy a property, but they are unable to do so because they do not understand how to manage their credit. It is, however, feasible to raise your credit score. You will have a higher chance of getting a mortgage if you do this.

Two key variables influence your credit score. You should know these to keep your credit score under control. Your payment history contributes to 35% of your total score, while the amount of debt you owe factors for 30%. You can increase your chances of buying a property by handling these two items. Here are some tips to manage your credit score when buying a home: 

  • Pay consistently and on time – Late or missed payments can have a significant impact on your credit score. Not only that but your payments should be made on time so that lenders can see that you’re dependable and trustworthy when it comes to purchasing a property.
  • Don’t exceed your credit limit – While it may be tempting to spend more than you can afford, it will eventually pile up and negatively impact your credit score. You should retain 30% of your credit available.
  • Do not close out your accounts – When borrowing a big amount of money, such as mortgages, having a long credit history shows lenders that you are trustworthy. Closing accounts with history will shorten this period and give the appearance that you are less trustworthy.
  • Avoid carrying balances – Don’t carry huge sums on new credit cards because credit usage is one of the most important criteria in calculating your score. Pay off new charges right away, even if it’s only for a day.
  • Be current on all bills – You should keep your account information up to date with creditors because any gaps in billing cycles might affect you by giving lenders an inaccurate picture of your debt situation.

How long does everything take?

“Can you tell me how long it takes you to manage your credit?” is a question to which numerous people have given varied answers. People have discovered different answers to this topic for various reasons, such as raising their credit score or just managing their current credit, and there is no one-size-fits-all option.

Between three and six months is the typical time it takes to get ready to buy a property. Preparation entails the following steps:

  • Correct any mistakes on your credit report.
  • Pay off your debts.
  • Have an emergency fund and enough money set aside for a down payment.

It also includes saving for other expenses with owning a home, such as maintenance costs, household improvements, and different unforeseen needs. 

When looking for funding, it’s ideal to be financially stable. Lenders prefer borrowers who can afford monthly payments and pay off their debts on time. You spend time waiting on lenders while preparing for a house purchase that can take 3-6 months. It usually takes 2-3 months before you know if you qualify and to get authorized for a mortgage. Lenders do this to ensure that they aren’t taking on too much risk with who they are lending money to.

After approval, it can take about one month for your lender to order an appraisal of the property. This is after receiving your application, credit report, and all supporting documentation needed. They will put together a file on you as a potential borrower. They will send out someone for an appraisal to do an in-depth look at the property you’re interested in afterward. This process includes details about your employment history, income level, and debt obligations. The appraisal is used to determine if there is enough equity to cover the costs of buying and shutting down any existing mortgages on the house. 

It usually takes 3 weeks for your credit to return after obtaining one preliminary report. This report comes from an independent third party hired by your lender. If everything appears to be in order, they’ll complete everything required for pre-approval in another week or two. If your credit report requires any more information, the process could take four or five weeks. Once finished and you’ve proven you have enough income, you can begin looking at houses with a real estate agent. The complete process takes 6–8 weeks from pre-approval to offer. Keep in mind that it can take considerably longer due to other bank reviews.

Buy Your Dream Home

Congratulations! You now know how to manage your credit score to buy your dream home. Once your credit has improved, we can help you find the perfect home! Just check out our website, A Team Marketing.

Published by Jeff Anderson

We are your premier real estate solutions team. We solve complex real estate issues.