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    There's more to consider than legal concerns when buying a home
    Posted: 2017-07-11 10:40:48

    Many people may be looking to close on a purchase of a home. There are many factors to consider in the purchase of a home beyond legal concerns.

    The Relevance of Credit Scores When Buying a Home

    Nowadays, very few people have the luxury to purchase a home without relying on the banks help for credit and a mortgage. Thus, before deciding to become a homeowner,  a smart decision would be to learn about your credit score, or even try to improve it as it can be a deciding factor for your creditors.

    A credit score is essentially a portrait of someone’s credit that plays an important part in the decision-making process for banks and potential lenders, when they evaluate how likely you are to pay your debts. When applying for a house loan, learning about your credit score 6 to 8 months prior to your application can help you gauge whether you qualify for a loan, and can also give you some insight into specific interest rates.

    What are the five factors that determine one’s credit score?

    Payment history is the most important piece of one’s credit profile, which accounts for approximately 35% of the credit score. When applying for a house loan, this allows prospective lenders to see how trustworthy you are with your payments.

    Amounts owed, i.e. credit utilization (30% of your score)  and the length of your credit history (15% of your score) are also two important segments that show you can handle a reasonable amount of debt without any financial difficulty that will cause late payments. Also, types of credit and new credit, each accounting 10%, can help bankers decide what rates you qualify for.

    What is a good credit score for buying a house?

    When applying for a mortgage, lenders will examine your income, debt, and savings when reaching a decision, but your credit score is actually the most crucial factor that helps them determine whether to approve or reject your request.

    The credit score scale runs from 300 to 850, which means the higher your credit score number is, the better your chances are of getting a financial approval. Generally, a minimum credit score for a house loan ranges between 580 and 620. Furthermore, a higher credit score can also help you get a lower interest rate, which in turn can help you save money in the long run.

    The minimum credit score requirements for a house loan vary depending on the company or bank policy you opt for. Certain lenders are likely to consider a number of other factors that play into their decision, such as your income and downpayment on the house, which will consequently affect your interest rates. With that said, the best thing one can do is plan ahead and stay abreast of their financial report on a regular basis.

    Written by Sally Collins

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