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First Time Home Buyer: The Importance Of A High Credit Score

Credit is the other major challenge many new homebuyers face. Securing affordable financing based on applicants credit score, which may be bruised or simply not yet established. The first step to improving your credit score is to understand how your credit is evaluated.

In order to determine your credit worthiness a mortgage broker has to take a look at your credit report. A credit report is detailed history of how consistently you meet your financial obligations, such as loan, bill and credit card payments. A “credit score” is a number that is calculated based on personal information from your credit report and other sources – this can include your debt payment history, how often you seek new credit accounts and how much of your credit limit you use. This number represents your overall credit-worthiness or presumed reliability when it comes to meeting financing obligations – the higher the number the better.
Credit Health: Borrowers with high credit scores and good credit report gain access to better rates and a wider range of mortgage products. Keep your credit healthy by following these simple guidelines:
  • Always pay your bills on time
  • Use only up to 50 per cent of your credit card’s limit, and pay it off each month.
  • Check your credit report for mistakes by ordering  from Equifax and Trans Union
  • Do not go over your limit, as credit cards 9 times of of 10 have something called a "shadow limit"; while you can go into these funds, it lowers your score when you do
When mortgage lenders review mortgage applications, they take into account both the applicants’ credit report and credit score, as well as other factors such as income, employment history and size of down payment. Applicants with bruised credit may find themselves paying higher interest rate or even being denied financing entirely, that’s why it is recommended to seek professional advice before applying for a mortgage financing. In case if credit is weak, a mortgage broker can give a proper advice to prepare a new homebuyers before they step into one of the largest purchases in their lifetime.
While improving one’s credit takes time, a more immediate solution to weak credit is once again through the help of family member. By agreeing to co-sign on the property, family or friends can help borrowers who have trouble qualifying due to income or credit that in not yet well established. A consigner has the same legal responsibilities as homebuyer, and is responsible for paying mortgage if the principle borrower fails to do so. Co-signers do not have to be family members, but many lenders require that they live in the property.
It’s wise for homebuyers to seek out a mortgage professional like a mortgage broker and sit down and look at all the various options because each lender has its own guidelines. Moreover, consigners need to be aware that providing assistance to family member now may limit their own future borrowing potential. If the consigner is ever  considering getting a loan in the future – a car loan or mortgage, or increasing their existing mortgage – they may no longer qualify because now the lender will include that monthly payment in their debt ratio and overall qualifying process.
Still, family assistance in purchasing a home is a popular route, and the Genworth Family Plan is another option for families looking to buy together. So long as they have good credit, it allows parents to purchase a home for their children or even their elderly parents who wouldn’t qualify on their own, and with only five percent down (as opposed to 20 percent, which is generally required for secondary properties). For this option it is important to talk to a knowledgeable professional because we can really guide you and give a good home mortgage advice.

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