Prepare Your Finances The first step in your home buying process is to prepare your finances. Preparing your finances is one of the most important steps in your home buying process because it helps your lender determine if you will qualify for a home loan. Your lender will look at a variety of information to determine whether you’ll qualify, but they will mainly focus on these four areas: credit, down payment, income, and assets.
Credit It all starts with your credit score. Your credit score is the first metric lenders will look at to determine if you qualify for a home loan. Lenders estimate your ability to pay back money borrowed based on your credit score. A high credit score can result in a lower interest rate and save you thousands of dollars in interest paid over the life of the loan.
360-560
560-650
650-700
700-750
750-850
VERY BAD
BAD
FAIR
GOOD
EXCELLENT
Your credit score can range anywhere from 300-850. A strong credit score is generally considered to be 700 and above and a poor credit score is below 600. A high credit score can result in a lower interest rate and save you thousands of dollars in interest paid over the life of the loan.
Credit Reporting Agencies In the United States, there are three Credit Reporting Agencies (CRA): Equifax, Experian, and TransUnion. The CRAs collect consumers’ information and sell it to lenders when they are deciding whether they will approve or deny your loan request. These three CRAs own the rights to the FICO calculator, the tool that is used to determine your credit score.
HOME BUYER’S GUIDE
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