The journey toward buying a home isn't an easy one. Searching for Ridgewood homes for sale is only the first step. Next, you have to apply for a loan to be able to pay for the house once you find it. To do that, you typically need a credit score of at least 620, but the higher your score is, the lower an interest rate you can procure, and the lower your monthly payments will be.
What if your credit score isn't high enough? There are a few things you can do to improve it. Our real estate agents explore some tips for boosting your credit score to help you buy a home.
Leave Accounts Open
After years of struggling with credit card debt, you've finally paid your card off. The next step is to close it out, so you can't buy more with it, right? Wrong. One factor in your credit score is the age of the accounts in your name. The longer you've had an account, the better it reflects on your credit history, so closing one can hurt your score. Likewise, opening a new credit card a few months before applying for a mortgage can lower your score. Leave your credit cards active, and don't open new ones to establish that you've had a long credit history.
Pay Your Bills
The biggest factor in your credit score is showing you're capable of making payments on time. A late credit card payment can have a negative impact on your score for up to 18 months, and the record of that late payment can stay attached to your credit report for up to seven years. To be sure you're making your payments on time, set up automatic bill pay so the money can be taken straight from your account each month. If you miss a payment, you might send your creditor a goodwill letter. Explain why you missed the payment and why you won't miss anymore. If your payment history is otherwise good, this will sometimes convince them to remove the late payment from your report.
Add Rent and Utilities
You may have been making rent payments for years that are higher than what your monthly mortgage would be, but that usually doesn't count toward your credit score. However, there are online tools that will add your rent payments to your credit file, so it can boost your score. Likewise, there are tools that can add your utility bills to your credit file as well.
FHA
If your score still isn't high enough to get a traditional mortgage, you might consider an FHA loan. The Federal Housing Administration may approve you for a government-sponsored home loan with a credit score as low as 500. It allows people who wouldn't ordinarily be able to buy a home to get a loan with a lower down payment and a lower interest rate. However, you must also get mortgage insurance and pay monthly insurance premiums. Plus, there's a limit on how much you can take out with an FHA loan, so the amount you can get might not cover the cost of the house you want.
Navigating the ins and outs of home loans is a difficult process, but we can help you through it. We'll guide you through every step to ensure you get the interest rate and payment options that best suit your needs. Contact us to start your home-buying journey!
