Importance of credit score on real estate planning
Whenever you apply for a mortgage loan, the lenders judge your creditworthiness in order to predict whether or not you’ll default on loan repayment. Your credit score helps them to assess your likelihood of timely loan repayment. Therefore, it can be said that credit score is an important factor in your real estate planning.
How credit score influences your real state planning
If your credit score is more than 720, then the lenders will consider you as a potential borrower. You’ll get favorable terms and conditions on your mortgage loan. However, if your score is below 600, then it’ll be difficult for you to obtain a mortgage; even if you get a mortgage, you’ll not be able to get favorable terms on your home loan. Therefore, it is quite essential that you check your credit score before you go about your real estate planning. You can order your reports from each of the 3 credit bureaus, namely TransUnion, Experian and Equifax. These credit bureaus calculate your credit score with the help of FICO model. While calculating your score, they consider the information that is supplied by your lenders. Apart from this, your governmental records (such as, bankruptcy records, outstanding judgments, liens, etc.) are also important components of your score calculation.
Can you qualify for a mortgage with bad credit score?
It is possible to obtain mortgage loans even with bad credit records; however, you’ll have to pay high interest rates for it. There are several sub-prime mortgage lenders who offer loans to people with relatively bad credit score. If you wish, you can also try to qualify for VA and FHA home loans; while granting your loan request, they assess other factors than just your credit score. You can opt for the following options if you want to get a mortgage with bad credit score.
- Lenders may ask for increased down payment to compensate the loss if you default on your loan.
- Shop for mortgage with bad credit score and compare the loan rates and terms in order to get the best possible deal.
- Your real estate planning will not get affected by your bad credit score if your debt to income ratio is 28/36 or low.
How to improve credit score to get a favorable mortgage loanDo not get disheartened if your score is low. There are a number of ways to improve it. Here are some tips to improve your credit score.
- Avoid taking new lines of credit before applying for a home loan.
- Try to make your debt/bill payments on time.
- Monitor your credit records at regular intervals.
- Do not close your credit accounts abruptly even if you don’t use them.
Apart from influencing your real estate planning, your credit score can also affect your insurance rate. Therefore, if your credit score is low, then improve it before planning to purchase a property.
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