How Your Credit Score Impacts Your Home Buying Process #KnowCredit
Some are completely against credit scores and think they can just do without trying to improve their score, but I don’t think that’s the correct way to go.
Your credit score can impact all areas of your life, such as obtaining a job, waving additional deposits when signing up for new bills (such as utilities), renting a home, and probably most important of all – obtaining a mortgage and buying a home.
Even though it can make such a large impact on your life, your credit score can be quite easy to improve for the better, so why not just do it?
So, how important is a credit score to buy a house?
Answer: It is very important!
The needed credit score to buy a house can vary a little, but the higher your credit score the better. When you are in the 620 to 720 range, you may come across some problems as stated later in this post.
Below are different ways your credit score can impact your home buying process.
Your credit score can impact whether you are approved for a home loan or not.
The very first thing your credit score can impact is whether you are even approved for a mortgage. If your credit score is too low, then you may just be flat out rejected for a home loan.
Usually, the minimum credit score to buy a house is around the 620 to 650 range.
However, even if you are approved, you can still come across other problems which may prevent you from buying a home, as stated below.
Your credit score can impact how large of a home loan you are given.
If your credit score is not high enough, then you may not be approved for the home loan you are desiring. This may limit your home choices greatly.
Even if you think you can afford a home, the bank usually wants to see a credit score to back that up.
Your credit score can impact how large of a down payment you are required to put down.
If your credit score is not where the mortgage bank wants it to be at, you may be asked to put down a larger down payment so that the bank knows you are serious about your home purchase.
This shows to them that you are less likely to back out of the mortgage since you’ll have more put into it.
For example, instead of putting down 20%, you may be asked to put down 30%.
Your credit score can impact your interest rate.
Lastly, your credit score can impact the interest rate you receive on your home loan. Even if your credit score is high enough to get you approved, it does not mean you will get the best interest rate.
An interest rate difference of just 1% can mean a difference of around $100 or sometimes even more each month, so it is wise to get the best interest rate you can.
What was your credit score last time you bought a home? Did it impact your home buying process at all?
This post was created with support from Credit Sesame in partnership with Kasai Media.
