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How your credit score impacts your home purchase

One of the most important steps in buying a home in Santa Fe is getting a mortgage.  One of the first things lenders look at is your credit.

When you apply for a mortgage, the first thing a lender will do is look at your credit report.  A credit report displays your credit history and credit score.

A credit report is not only the credit number, but also displays many details of your credit history.  Things you might not have considered:

  • Information on employment and identity
  • Your payment history
  • Past inquiries made on your credit
  • Any information on public record, such as bankruptcies, liens and foreclosures

The other part of the credit report is the score itself.  Here is how it is calculated:

  • Payment History – 35%
  • Outstanding Debt – 30%
  • Credit History Length – 15%
  • New Credit Applications – 10%
  • Your Credit Mix – 10%

 

Your credit score is one of the factors that will determine your mortgage loan interest rate. The better your score, the better your interest rate is likely to be.

If your score is between 620 and 639—considered a risky score by some creditors—you could pay an interest rate of 5.718 percent on a $300,000, 30-year conventional mortgage. As of mid-August, 2010, If your score is at the high end, 760 to 850, your interest rate could be 4.129 percent on the same loan.

So, you can see how important it is to keep good credit.

  • Make sure all your bills are paid on time
  • Pay down your credit balances
  • Check your credit report on a regular basis for errors

If your credit score falls below 650, it is important to improve it by using the suggestions above. It can take some time to increase your credit score, but it is vitally important to show creditors that you are a responsible and creditworthy candidate.

Your credit history will follow you throughout your life. Therefore, making good credit decisions along the way will help a great deal when you’re ready to buy your new home.

I have been in the Real Estate business for 29 years and can help you with guidance and counseling during the home purchase process. I have a ton of experience in this market.

Give me a call (505-780-0310)  or an email, and let’s sit down and discuss how I can help you into a new home.

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