Are you in the market for real estate in Philly? Before you make an offer on any property, you should get your credit in order to avoid disappointment if your mortgage does not get approved. Even if your credit score is not ideal, you can still take steps to boost it before you buy. Here are a few things to know about getting your credit in check to increase your chances of getting a loan.
Know Your Number
No one wants to be reduced to just a number, but the truth is that banks do consider your credit score, along with other financial factors, before they will approve a mortgage. Your score can be based on a combination of these factors:
- Your payment history
- Any outstanding debts
- The length of credit history
- Your different types of credit
- The amount of new credit
Credit scores can range from 300-850, and the magic number for getting a mortgage is around 650. Below that number, you may not be able to get a loan at all, and if you do, you can expect a higher interest rate or a larger down payment requirement. The amount you want to borrow can also be a factor; the bigger your mortgage, the stronger your credit score should be.
Know Your Lender
Banks do their own risk assessment before approving loans, and they can look at the same information and reach different decisions. Rather than shopping around on your own to get the best deal, you can work with a mortgage broker who can do the leg work for you. Some of the information that banks consider include:
- Your source of income
- The kind of work you do
- The length of time in your current position
- Your down payment
Banks are not risk-takers when it comes to mortgages, so you need to reduce your risk to boost your chances of getting approved.
Know Your Options
Luckily, you can make a few changes to improve your credit score in a few months rather than a few years. You can:
- Pay down your balance to reduce your outstanding debt
- Pay your bills on time
- Check your credit report and clear up any errors
- Wait on any other big purchases like a new car until you have closed on the property
Another smart tip before you go house shopping is to get pre-approved for a mortgage. That way, you know exactly how much you have to work with and can stay within your budget. If you want more information about how to quickly boost your credit score contact me, Ian Perler, Mr. Philly Real Estate. I have a simple guide to help you make some easy changes that can have a large impact on improving your credit score.