For many of us, owning a home is one of those BIG goals in life. You want something you can really sink your equity into, customize to your preference without having to consult with a landlord, and somewhere you can start a family and raise children. If your credit is lackluster, you may be looking how to improve your credit before buying a home. You’ve come to the right place!

Depending on your situation, bad credit may be hurting your chances, so I’ve created this blog post to help you clean up your credit before buying a home!

Is Credit Everything Lenders Consider When Purchasing A Home?

Credit isn’t the only thing lenders consider, but it’s definitely a major component. It’s vital to have a solid credit score before applying for a mortgage. If you pass the rigors of the loan application process, your “okay” credit score could hurt you in the long run by making you pay more for interest you could have otherwise saved. Additionally, a lower credit score may require you to contribute a much larger down payment of cash at closing in order to finalize the mortgage.

A credit score can range from 300 to 850, with 850 being a perfect credit score. Anything above 700 is “Good”, while any credit scores below 650 is considered “Low”.

Many lenders DO have special programs designed to help those with bad credit get loans for home purchases. But to save yourself the most money (in the long and short term), you can do some things NOW to improve your credit before buying a home.

Take A Look At Your Current Situation

If you work a steady job with steady income, have worked that job in the same field for 2 years or more, and are able to put down 10-20% down on a home, you will have much higher chances of being approved and granted a loan, even if you have a low credit score.

Figure out where you’re at currently in your job situation and history. You also need to get a snapshot of your current credit history. Did you know you can get a free credit report, from all 3 credit agencies, once a year (as authorized by federal law)? Check out this link.

Once you get your report, go through it slowly. Check everything on it to ensure it’s accuracy. There’s a good chance you may uncover some errors on your credit report, which MIGHT be dragging your credit scores down.

Once you’ve identified any errors, it’s time to fix them. You’ll need to dispute the errors with each agency you find errors within (Equifax disputes, Experian disputes, & TransUnion disputes) and provide the relevant information needed to fix the errors on your report.

What Credit Score Do You Need To Buy A House?

This answer can vary by area and type of loan being issued. In general, lenders will look for a credit score of 660 or higher to grant a mortgage. To get the best interest rates when buying a home, you should aim for a score of 740 or higher!

Better score = better rates = more money in your pocket! According to Lending Tree, home buyers with a 30 year fixed-rate mortgage around $250,000, and with “very good” credit scores will save nearly $30,000 dollars in interest payments over the life of the loan vs. someone with an “okay” credit score. That averages to roughly $1000 PER YEAR in cash that could go right back into your pocket.

Tips To Help You Boost Your Credit Score

1. Check your credit reports and dispute errors (talked about above)
2. Pay down your credit debts
3. Get your credit bills up to “current”
4. Make on time payments to bills/debts
5. Ask for a credit limit increase
6. Get added as an authorized user (piggybacking on someone else’s good credit)

The above 6 steps can all be done in a couple month’s span and really do quite a bit for your credit score. It’s not unusual for someone with low credit to boost their scores by a couple hundred points, just by following the tips above.

Above all, remember that your credit score is just like your health – treat it well and it’ll treat you well back. Take care of it!

If you’ve done all of the above and you’re ready to get started with buying a home with realtors in Lancaster, PA, let’s chat! Use the contact form below or click here.