1. What's Your Credit Score?
Do you have any idea what your credit score is? If you don’t, you better before you even think about home shopping. First off, skip the guy who sings on television about free credit reports—the company he advertises (and sings for) isn’t free. You can receive an annual credit report via the Federal Trade Commission (FTC) for free.
It’s true your credit score says a lot about you, but in today’s economy, many of our scores have slipped due to unemployment and late payments on monthly debt. According to Credit Loan, to qualify for premium financing and a low-interest rate, your score needs to be at least 720—and the higher, the better.
Most Americans, says Credit Loan, fall in the 600 to 799 range and where you fall on that scale will determine whether you even qualify for a loan. If your score is between 675 and 719, you’ll still be able to obtain a loan, but this score is considered on the average side so expect a higher interest rate. Scores falling in the range of 620 to 674 means you’ll need to find a sub-prime lender and if your score is 619 and under, most lenders won’t even look at your loan application.
So, this lesson? Know your credit score and then shop for homes. If your score is too low, you may consider a land contract or owner financing (see mistake number five).