Have you ever wondered how your "FICO" (Fair Isaac Corporation) as in FICO credit score originated? I have.
So I did some digging and discovered that in 1956, Bill Fair, an engineer and Earl Isaac, a mathematician, created a system to assess creditworthiness using mathematical models developed from the behavior patterns of millions of prior borrowers.
Their formula reviews such things as; the age of your accounts, late payment history, total available credit, and outstanding debts. The more traits you share with people who have proven to be good credit risks, the greater your score.
Hmmm ... A mooovie? ... I like movies! Do you know what else you should know about your FICO score?
Pretty informative video huh? Did you know that your FICO score is used in 90% of credit decisions? So, if you are in the market to purchase a home, you now understand the higher your FICO score, (ranging from 300 to 850) the lower the interest rate you will be able to receive. The difference between a 3.5% interest rate mortgage and a 5% interest rate mortgage can mean tens of thousands of dollars over the life of the loan!
Pre-approval vs. Pre-qualification Pre-approved buyers are the "preferred choice" among sellers! Pre-approval means that the lender is usually prepared to approve your loan after verifying your financial vitals.
Pre-qualified only means that the lender is estimating what you may qualify to borrow. It does not mean you will be approved for a loan.
If you are serious about becoming a homeowner, get pre-approved for the actual amount you can borrow. Apply to several lenders within a two-week period to prevent lender inquiries from damaging your credit report and lowering your FICO score.
I am Pre-approved ... Now What? Once you are ready to purchase a home, you should sign a buyer agency agreement with an experienced realtor who will represent your interests.
You can search for homes and open houses online to identify the style of home you like and the features most important to you. I recommend visiting perspective neighborhoods at different times of the day and night during the week and weekends to get a sense of where you want to live. Test-drive your commute to work, and look for amenities that appeal to you.
Your prior preparation will make the entire transaction easier when you are ready to make an offer on a property.