First Time Home Buyer: Credit Scenarios
As a first time home buyer you'll almost definitely need a mortgage to help you buy the home of your dreams mostly because your savings are not adequate to meet the purchase price. Apart from that, the home needs appliances, furniture and fittings to meet your taste and thus make your life more comfortable.
All these additions to your home are an additional drain to your funds and if you have financed the home on credit, you will also most likely finance these items using credit-cards, hire purchase or some other form of credit arrangement.Too much talk about credit can be scary especially if your experience so far has not prepared you for it.
Every lender is greatly concerned with getting paid in full, that is principal plus interest. This concern is even more pronounced when the borrower has previously had no financial relationship with the lender which is a very common case in mortgages issued to a first time home buyer. This is the reason why the lender relies heavily on your credit score in determining the credit terms to offer you.
Your credit score is a measure of your creditworthiness based on your financial history. Of particular interest, with regards to credit issued to a first time home buyer, is the analysis of your credit files. This is information on past borrowing, the interest rate charged on you and your repayment schedule. This information is available to lenders from credit bureaus and given that lenders use this score to determine the interest rate you pay, it is important that you rank high on your credit score.
There are a number of things you can do as a borrower to ensure that you get a good credit score. We said earlier that the greatest concern to a lender is getting back its money. Making timely repayments of your bills in terms of interest and principal owned is therefore the greatest sign of creditworthiness. Bankruptcy is a sign of trouble and no lender will touch you if you've been declared bankrupt in the last few years. Credit card balances are often ignored by borrowers and you should make sure that you have repaid your balances to boost your score. The time you take to repay your debts is a critical factor. For a first time home buyer, repaying your debts before they fall due boosts your credit score greatly.
Get yourself started down this road wit hthe free eBook "Get Mortgage Ready Kit" for first time buyers. Click the button below. The guide covers credit, down payments, mortgage lingo and more. Get your copy today and get ready to buy your first house.
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