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Disclaimer: the information below is for illustration purpose only, none of it is to be used as applicable to your particular situation. Please consult a realtor for a personalized evaluation.

Want to qualify for a home loan?

The very first step a loan officer will take is to review your credit worthiness, most commonly known as FICO Score, it is one of the most important key factors used by mortgage lenders to assess the credit risk of each loan applicant.

Home loan hypothetical example:

Mrs. Timely with a FICO score of 780 is likely to get an interest rate of 7%. Higher credit score = lower interest, and lower risk of defaulting on a loan.

Mr. Late with a FICO score of 600 is likely to get an interest rate of 8%. Over the life of the loan Mr. Late will end up paying more on interest rate.

Do not give up too soon, there are a variety of loan programs that will approve your loan as long as your down payment covers at least 10% of value on the property.  

Your credit score will not be impacted when you check your own credit report or FICO Score.

Help yourself by taking these steps:

1. Check your credit report to determine if there are delinquent accounts erroneously submitted to the credit reporting agencies (Equifax, Experian and TransUnion), if so, contact the agency that is reporting the issue to dispute and resolve inaccuracies. This process can take a long time.
2. Pay your bills on time! 35% of your FICO rating calculation is based on timely payment to creditors.
3. Keep a low balance on your credit card! 30% of how much you borrow from your credit limit is calculated for your FICO rating.  For example, if your credit line has a limit of $5,000.00 – acquire a debt well below that limit and make timely payments.
4. Your credit history weights 15% of your FICO rating, reason you want to keep open older credit cards. Lenders want to prevent you from having a “payment shock”, you want to show lenders you have experience managing your credit, and that you will not suffer from financial shock trying to manage your new mortgage obligation.

In summary help yourself by increasing your FICO Score calculation with each credit decision you make:

• 35% is based on your payment history
• 30% Amount Owed
• 15% Length of Credit History
• 10% Credit Mix – use retail stores and credit cards
• 10% New Credit – only open new accounts if you do not already have a couple of credit history already showing with the credit reporting agencies.

In addition to your FICO score, the lending companies also take into consideration:

• Your employment history
• Your current income and
• Funds available for down payment and closing costs.

Start your family legacy now.