Is Credit All That Important When Buying a Home?

Buying a new home comes with all of its challenges. From finding the perfect place, to settling paperwork with agents, the factors that go into buying a home are endless. That is why it is essential to understand what factors are the most influential when it comes to purchasing a home; and one of those factors is credit.

Often times new perspective buyers will ask if credit is at all important when it comes to finding yourself a new home. Credit is absolutely essential for buying a home because it determines whether you can buy a home at all, and if so, what the mortgage rate for that home will be based on your credit score. That is why as a first step, it is very important to have your credit score evaluated. When it comes to having that credit score evaluated though, buyers must make sure that all three of their FICO scores are being evaluated. Lenders will do intensive credit checks to make sure that all three of your scores fit the mold for lending.

Therefore, it is also important to understand what kinds of credit scores lenders are looking for in a potential home buyer. Most lenders are looking for someone who’s score falls around the 740-760 range. This indicates to them that this buyer is a low risk client who has a history of paying their bills on time.

Underwriting Manager at Equity Now, Matt Hackett says, “Lenders look at several variables on the credit report: outstanding debt, the outstanding debt relative to the total available debt; the length of the credit history, and the pursuit of new credit — how many inquiries are on your report.”

These kinds of factors are the ones that can determine exactly what type of mortgage rate you are going to have and how long your payment will last. On the other hand, if your credit score is at 680 or lower, the chances of you finding a lender to back you up are very slim. Due to the recent market collapse in the late 2000’s, lenders are much more diligent about determining if their client can actually pay their mortgage, and if their credit score doesn’t show a history of such, than they will refrain from granting any type of loan. As Hackett mentions, “credit standing, even today, is more vital than it was a year ago.” He also makes note of the significant difference that even a percentage point can make in a payment.

 

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Though some may not believe that credit plays that big of a factor in the home buying process, it is essential to have good credit in order to be approved by lenders. Whether your score is 700 or 780, even a change in one single number can play a huge role in the way your mortgage will be paid. Therefore, by understanding what it takes to earn good credit and realizing the role that credit plays in buying a home, people can come to understand just how important it is to have a history of good credit. So if you’re in the market for a new home be sure to have all three of your FICO score evaluated before you begin your search for the perfect place.

 


About the Author | Debbie Hooker

Is Credit All That Important When Buying a Home?

Owner/ Listing & Buyer Specialist/ Broker / Realtor® NC/SC

Debbie joined Allen Tate after relocating to Charlotte from Florida and experiencing the challenges a family move can bring. Her passion to help others and her incredible work-ethic are one-of-a-kind. Debbie partnered with Andy in 2002, forming a team and becoming a top producer for the company, and has helped grow the team to what it is today.
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