Here's
How Your Credit
Score Will Affect How
Much House You'll Be Able
To Buy...
There is a new "buzzword" in the mortgage
industry.
Actually, it's two buzzwords: Credit Scoring.
In their never ending search to find an easier
way to rate a person's financial ability, mortgage companies are
using a new system called credit scoring (Also called "FICO"
scores - I won't even tell you what that means).
When lenders pull up your credit report, they
can look at
all of the debts that you have, how much you owe, how well you make
your payments, and many other things like if you've had any bankruptcies
within the last several years.
With your credit report, lenders now get a "credit
score" which takes all of this information and creates a "credit
score" for you. This credit score is a number that lenders
use to decide which types of loans that you will be able to get
and be eligible for.
As with all new things, there is controversy
over these credit scores.
Some types of loans require that you have a
certain credit score to get the loan - no exceptions. And credit
scores change over time. As a matter of fact, just applying for
credit can lower your credit score.
Now
that you know what a
credit score is, here's how
to make sure you have the
best one possible.
First of all, don't apply for any new credit
cards or consumer loans.
Don't go down to the furniture store and take
them up on the "No interest, no payments, no nothin' for one
year" financing program -- and of all things, don't go out
and finance a car!
You can do all of these things after you buy
your house and get your mortgage, but for your own sake, don't do
it before. Buying things on credit not only hurts your credit score,
but it also leaves less money for you to use as a house payment.
And lenders look at this figure also to determine
how much money they will lend you, and how much they will charge
you to lend it.
So wait until after you've bought your home
and moved in to get that new couch or big screen TV-- And there
is another reason to wait.
After you buy your home, you can get a loan
for up to 125% of your home's value to buy whatever you want.
And when you get a loan against your home, all
of the interest you pay is tax-deductible!
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