Rosemarie Morello's Blog
It’s hard to overstate the importance of credit scores when it comes to buying a home. Along with your down payment, your credit score is a deciding factor of getting approved and securing a low interest rate.
Credit can be complicated. And, if you want to buy a home in the near future, it can seem daunting to try and increase your score while saving for a down payment.
However, it is possible to significantly increase your score in the months leading up to applying for a loan.
In today’s post, we’re going to talk about some ways to give your credit score a quick boost so that you can secure the best rate on your mortgage.
Should I focus on increasing my score or save for a down payment?
If you’re planning on buying a home, you might be faced with a difficult decision: to pay off old debt or to save a larger down payment.
As a general rule, it’s better to pay off smaller loans and debt before taking out larger loans. If you have multiple loans that you’re paying off that are around the same balance, focus on whichever one has the highest interest rate.
If you have low-interest loans that you can easily afford to continue paying while you save, then it’s often worth saving more for a down payment.
Remember that if you are able to save up 20% of your mortgage, you’ll be able to avoid paying PMI (private mortgage insurance). This will save you quite a bit over the span of your loan.
Starting with no credit
If you’ve avoided loans and credit cards thus far in your life but want to save for a home, you might run into the issue of not having a credit history.
To confront this issue, it’s often a good idea to open a credit card that has good rewards and use it for your everyday expenses like groceries. Then, set up the card to auto-pay the balance in full each month to avoid paying interest.
This method allows you to save money (you’d have to buy groceries and gas anyway) while building credit.
Correct credit report errors
Each of the main credit bureaus will have a slightly different method for calculating your credit score. Their information can also vary.
Each year, you’re entitled to one free report from each of the main bureaus. Take advantage of these free reports. They’re different from free credit checks that you can get from websites like Credit Karma because they’re much more detailed.
Go through the report line by line and make sure there aren’t any accounts you don’t recognize. It is not uncommon for people to find out that a scammer or even a family member has taken out a line of credit in their name.
Avoid opening several new accounts
Our final tip for boosting your credit score is to avoid opening up multiple accounts in the 6 months leading up to your mortgage application.
Opening multiple accounts is a red flag to lenders. It can show that you might be in a time of financial hardship and can temporarily lower your score.
A struggle that everyone faces is keeping priorities straight. As careers advance, families grow, and financial responsibilities increase, some priorities fall by the wayside.
One example of how that can happen is with home security. When you have your mind on twenty other things that need to be taken care of this week, it's easy to forget about consistently locking doors, turning on security lights at night, and being observant of suspicious activity or people in your neighborhood.
There are dozens of home security mistakes people make every day, most of which are the result of complacency or a lack of awareness. Probably one of the biggest security blunders many homeowners and renters make is broadcasting the fact that they're away from home, traveling, or planning to leave the house for any period of time.
In many cases, you may be unaware of security breaches you're creating. In an era in which nearly everyone has a social media presence, it's very common to let your guard down and announce on Facebook or another platform that you're planning to go to a high school reunion, a wedding, or a week-long vacation at a Florida theme park.
While sharing personal information on social media or blogs may be one way to keep in touch with friends and family, it's often safer to be a little vague about exact dates and times you're away from home. Once you've returned, there's certainly no harm in providing a full account of your travel adventures, but doing so beforehand can be a little risky -- especially if you haven't set your social media account settings to private
Forgetting to have your mail or newspaper delivery suspended for the duration of your absence is another way people inadvertently advertise the fact that their house is unoccupied. The ideal scenario is to have a trusted neighbor keep an eye on your home while you're gone. That enables them to report any trespassers or other suspicious activity to the police.
Even if you don't have mail or unread newspapers piling up in your mailbox, driveway, or front steps, there's still the chance that an unexpected package will be delivered and left out in the open for passersby to see. You can't always predict when a box, a catalog, or an advertisement is going to be left at your home, so it pays to have a friend, relative, or neighbor check on your house daily to remove any telltale signs that no one's home.
Perhaps the ultimate in home security is to have closed circuit cameras, monitored alarms, and/or a wireless security system installed in your home. Once you get the hang of it, being able to monitor and control different aspects of your home environment remotely can enhance your security, your safety, and your sense of well-being.
If your home is on the market, you may wonder why it hasn’t moved off the market. There are many ways to make adjustments to the price of your home, but if not done correctly, you could sabotage the sale of your home. Let’s say that you have your home as an FSBO (For sale by owner.) Buyers may wonder what’s behind the price of the house. Does the seller genuinely want to move the home to the sold category quickly? Why has the home been for sale so long?
You could face the same problems if you’re working with an agency. The difference is that s a seller, the agency is by your side, helping you to make the right decisions when it comes to pricing your home.
You need to be realistic when pricing your home as a seller. Of course, you want to make a return on your home. Of course, you think your home has great value. The critical point is that you need to understand the state of the market along with the neighborhood your home is located. So much goes into the pricing of a house.
Along with your agent, you can do some investigating to see where some improvements could be made in marketing your home. Look at the following:
How has the house been received on the MLS?
Are the significant benefits of the home highlighted?
How many open house opportunities did buyers have?
Are there good pictures of the house online?
Do the signs leading to the house stand out?
Can you add anything to the marketing of the home like a virtual tour?
While real estate agents have general guidelines as to how a home at a certain price point should be marketed, you can always be your own advocate.
The Consequences Of High Pricing
If you price your home too high, there are some consequences. Your home will stay on the market for an extended period of time if it's overpriced. Buyers will wonder why the house has been listed for so long, wondering if there’s something wrong with the property. Buyers will wait even longer to bite on the home in these circumstances because they are waiting for a price drop.
The best thing you can do in this circumstance is to take your home off the market. Work with your real estate agent. He can let you know whether it’s a good time to re-list the home. Perhaps you can make some improvements to the property in the meantime. A fresh listing and a clean look at the house may help buyers to find the property more easily at a price that pleases them!