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How do I fix my Credit to Buy a Home

Fix Credit to Buy a Home
Written by BidyutJi

Willing to buy a home? This is a long process, getting a home loan requires a good credit. Once you approach the bank and request a lending, credit is the most wanted thing. Therefore, it is important to repair credit to buy a home. Most of us crave to own a house, as buying a home is one of the best blessings of life. Here you can shape memories and work hard towards achieving success.

Living with a bad credit is almost impossible. If you have repaired your credit score, you can get easy finance options, insurance benefits and more. Good Credit score benefits are not only limited to a home loan. You can yield a lot of benefits out of your fair credit record.

Improve Credit to buy a Home

Benefits of Having a Good Credit

  • This is solely related to the credit repair process. A good credit score help in finances, therefore you can easily get assistance from the bank and get your dream home financed. While you have applied for a home loan, there arises a fear of disapproval. Usually, home loans require a fair credit. Unlike credit cards and mortgages, the approval process does not only consider credit score. There are other factors that come into consideration in the home loan process.
  • Rent apartments and houses without much hassle. These days landlords won’t lease their apartment to an individual who has a bad credit. Therefore, it is important that you repair your credit.
  • Better Insurance Rates. If your credit score is fair you can enjoy a much better insurance rate. You will have a pay less compared to the ones with a bad credit score.

Repair Credit to Buy a Home

The credit repair process involves a lot of factors. We have made the tutorial extremely easy for you. Simply read below and learn how to fix credit.

Check your credit score

In order to fix credit for buying a home, you can do the things yourself. It is not essential to consult credit repair firms that burn a hole in your pocket. The first step is that you actually need to find out your credit score. That way you have a baseline and you know how much you need to improve in order to get the best rates possible. You can go to credit karma and check your credit score for free.

Next, know that you’ll need at least 660 credit score just to get approved by a lender, however, if you want to get the best interest rates and save the most money, you actually need a 720 credit score and above.

Your credit score is calculated by looking at the following five things.

  • Payment history
  • Outstanding Debts
  • Length of your credit history
  • Types of credit you have used
  • Amount of new credit

Problems start when your score is below 660, if the score is below that number, it is an alarming situation for you to start developing the plan of attack to clean up credit and qualify for a home loan. That way you can start improving in those areas.

Credit is important but do not overstress

You might be feeling a little overwhelmed with all this credit stuff, so go ahead take a break, get yourself a pancake breakfast. You know what? Just relax for a second and we will come back to this credit thing at step 3.

Remember that your daily credit actions affect your credit score

Now that you know from your credit report card what areas you need to focus on, now is the time before you buy a house, take the next couple of months build up your credit score by taking these proactive steps continuously. Whether that is paying off your debt or to use your credit card better. Remember that every day your credit actions affect your credit score.

Elaborate things to the lender in writing

Give the lender, in writing, the reason for your bad credit. Explain your situation if a particular credit card bill was never delivered to your new address or if a postal employee was stealing the neighborhood mail. Explain the reasons, try to make the lender understand. Even when a lender’s  computers reject you, a human being will give a second thought by looking at your application again to ensure if there is any way to make things work. Some lenders are more sympathetic and understanding than others, you just have to hunt a bit to find them.

Look for a good mortgage broker

Good mortgage brokers provide a useful service. They know which lenders will ensure transparency to people with credit issues. A mortgage broker looks for the best lender for your unique situation, helping you save an enormous amount of money. Especially, when your credit score is bad, this can help you get a loan for purchasing a new house.

Mortgage pre-approval

Once you have found a lender that is ready to work with you. You can obtain a secure home loan before you ever look at a single house. First, get your credit report as clean as possible, try to pay off as many outstanding debts as possible, to build your credit score. Then go to a mortgage lender or broker in order to get a pre-approval certificate, to become pre-approved your loan officer will check your credibility and verify your income and documents.

The lease to purchase option

If you already lease the home you would love to buy, and the owner agrees to sell it to you, a part of your rent will go toward your down payment. At a certain decided date, you will gather some equity.

Borrow from your relatives and friends

Although this should probably be the last option, still it is an alternative for most of us. If you do borrow money, you need to disclose this information to the lender.

Caution

When you register for a home loan and everything has worked out, watch out not to mess things up. For instance, do not get out and finance a car, while you are waiting for your home purchase to close.

 

Low credit score does not decide your destiny of owning a house. Make efforts to clean your credit reports and hang in there.  It is a dream worth achieving, so keep your hopes high and strive for your dream of owning a house.

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About the author

BidyutJi

Marketing professional with over 17+ years of progressive experience in digital marketing, product management, and user experience design.
Entrepreneur, Mentor for 1k+ Startups, Speaker. Passionate about innovation and entrepreneurship. Helped 1200+ small business to large corporations to grow through digital marketing and conversion optimization.

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