Many people want to buy a home, but the thought that they have bad credit or when younger or new to the country no credit makes them believe they cannot purchase a home. The answer is that there are many options for low credit score buyers, and secondly that it may take some time, but it is not hard to improve or create a credit score.
You also should know the score you find online, via Credit Karma or your credit card company or bank is not the score used to offer you a loan. There are multiple different scoring models, so do not be surprised if the model used by the lender gives a lower score than what you see online.
One of the important things to know when buying a home is that your credit score when using a mortgage is very important. The score will determine if you can get a loan and what rate you will be quoted as well.
The lower your credit score the higher risk you present to a lender. The higher risk you present causes the lender to offer you a higher interest rate to offset that higher risk, and in some cases higher fees up front.
The item that counts the most towards a credit score is paying your bills on time. Secondly, how much of your credit you are using, the scoring model likes you to use less than 30-35% of your available credit. So, if you have $1,000 credit limit, you should not be using $900 of it, but more like $300-350. If you go above this lower amount it is good to pay it down or off before the payment date if you can.
Also the scoring models prefer borrowers to have an assortment of different credit, from long term loans, to short term, like credit cards as well as utility payments.
If you are thinking of purchasing a home in 2025 or 2026 it is never to soon to plan. Talking with a loan officer or broker can help get you prepared well in advance so that there are no surprises that throw your home purchase plan off the rails.
Call me and I can set you up with a good local lender who can check your credit and give you advice on how to improve or establish your credit so we can make your home purchase goal a reality. Contact Nick Vandekar, Selling the Main Line and Chester County, with Realty ONE Group Advocates, office 484-237-2055, cell or text 610-203-4543, or email Nick@VandekarTeam.com today.
Image courtesy of Kadokarci, Dreamstime
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