People in Harlingen who are interested in purchasing real estate should take some time to build their credit scores first. There is a lot of excitement about conventional and FHA loans and people not needing perfect credit to qualify for mortgages. But people who finance homes with lower credit scores often end up with unattractive interest rates and loan terms that could affect their ability to keep their properties in the future.
Many people believe that the primary factor that lenders consider is income. It does not matter how much money buyers make, if they do not have good credit histories, then they will have a harder time getting approved. Potential buyers should get copies of their credit reports and evaluate them. They should look for discrepancies and dispute them immediately.
Pay off collections and judgments
Collections and judgments that show up on credit reports can seriously damage credit scores. The longer they go unpaid, the bigger the negative impact they have. Many people tend to ignore these in hopes they will go away. However, lenders do not look favorably upon potential buyers who have them. Buyers should pay off any collections and judgments as soon as possible.
Maintain positive payment history
Maintaining a positive payment history is one of the best things that people who plan to purchase homes can do. This behavior shows lenders that they are capable of managing their finances. Lenders want borrowers who will take their payment obligations seriously and pay them on time. People who pay their bills on time also have higher credit scores than those who do not. Late and missed payments have a negative impact on credit scores.
Some people may feel tempted to close their credit cards once they pay them off. Doing so can hurt their credit scores instead of bringing them up. People should set their paid off credit cards to the side and leave the accounts open so these can reflect positively on their credit reports.
Improve debt-to-income ratio
Mortgages are loans. In order for most people to qualify for mortgages, they should have very minimal debt. Credit payments and other financial obligations can hurt a person's chances for approval because they affect the overall debt-to-income ratio. Paying down all credit cards and other bills can increase the amount of income that is free for a new responsibility, such as a mortgage payment. This also makes it easier for them to qualify for mortgages that they can reasonably afford.
It is important for anyone who wants to purchase a house to plan carefully. Buying a home is not an overnight process, particularly when a person needs time to improve credit scores. The higher the score, the better and more favorable the interest rates and terms. People who rush through the process often end up facing insurmountable complications that end in foreclosure. Anyone who is interested in buying real estate should speak to an attorney so they can learn more about their options.