How to Improve your Credit Score to Get a Mortgage

If you’re in the market for a mortgage, it’s important to look at your credit score first. Many potential buyers don’t realize they can check their credit or improve it, but you can do both.

First, pull your credit report here. Everyone gets free weekly access to all three credit reports, so don’t hold back. Once you know your credit history, you can take the necessary steps to improve it.

Why your Credit Score is Important

You may wonder why your credit score is so important.

Here’s why.

It’s the first thing lenders look at when you apply for a mortgage. If your credit score isn’t high enough for the chosen loan program, they’ll decline your application without looking at it further.

Think of it as your first impression to a mortgage lender. You want it to be as good as possible or you risk not getting approved.

Here’s how.

How to Increase your Credit Score

Your credit score changes monthly. With these simple changes, you can increase your credit score and your chances of approval.

Bring your Accounts Current

If you have any late payments reported on your credit report, get them current fast. Late payments can hurt your credit score the most since your payment history makes up the largest portion of your credit score.

Pay your Debts Down

The next largest part of your credit score is your credit utilization. This refers to the amount of your credit lines you have outstanding. Any amount over 30% of your credit line or $300 for every $1,000 in credit line, hurts your credit score. Work on paying your debts down and watch your score increase.

Don’t Close Old Credit Card Accounts

It sounds odd, but keep your old credit card accounts open. They help your credit age. Your credit score improves when you have older credit accounts. New accounts don’t have a history and can make you a higher risk.

Don’t Apply for New Credit

If you’re in the market for a mortgage, avoid applying for any new credit. New accounts bring your credit score down and increase your credit utilization.

Wait until after you close on your mortgage to open up a new credit card to furnish your home or to buy that new car. New credit will only decrease your score and your chances of mortgage approval.

Final Thoughts

You don’t need a perfect credit score to get a mortgage, but the higher your score is, the more likely you are to get approved. Working on your credit score before you apply increases your chances of approval. It also helps you get better terms and interest rates.

It may take a few months to see a change in your credit score, though. Don’t expect changes overnight. If you want to apply for a mortgage, I suggest pulling your credit 6 to 12 months before you apply for a mortgage to give your score enough time to improve.

What goes up must come down, right? At least that’s what everyone is saying about the real estate industry. It can’t possibly stay this hot forever, or can it?

If history repeats itself (and it usually does), the housing market will change. The housing industry goes through phases – meaning one phase won’t last forever and that’s a good thing. If housing prices kept increasing at the rate they are now, it would become near impossible for most people to afford a home.

Does that mean the housing market will ‘crash’ soon, though? We don’t think so, and here’s why.

Reasons the Market Won’t Crash

While no one can predict the future, here are the top reasons we feel the housing market won’t crash.

Prime Rate Remains Steady

The Fed has already announced that the prime rate will remain close to 0% throughout 2022. That’s reassurance right there that the housing market isn’t going anywhere anytime soon. With rock bottom rates, people will buy houses. This will keep up the demand and ensure that a housing crash doesn’t happen anytime soon.

High Lumber Prices Keep Building Rates Low

We all aren’t anywhere near the pre-pandemic building levels we were at a few years ago. It’s too expensive for builders to build like they were, so they’ve had to taper back. This means less. Inventory in the market. When there’s less inventory, but plenty of demand, it keeps pricing rising like they have been this year.

Demand is Still High

As long as the demand for housing is still high, the market won’t crash. It’s when the supply greatly exceeds the demand that prices start to fall and sometimes even plummet. Experts don’t see this happening for the rest of 2021 or even 2022. That’s good news for the economy as there’s no housing crisis looming in the background yet.

How Buyers can Compete

So how do you compete in such as competitive environment with low supply and high demand? You have to be prepared. Here’s how:

• Work with a reputable real estate agent so you always know about new listings immediately. If you drag your feet at all, you’ll lose your chance.
• Get pre-approved by a lender. Don’t look at houses until you are pre-approved. Sellers

want that letter stating you can afford a mortgage. They’ll accept your bid a lot faster if you have it.

• Know your budget. Don’t get caught in a bidding war and outbid yourself. Know how

much you can afford and stick to that number.

• Do your research. Know where you want to live before looking at homes. If you find a home and then research the area, you could lose it to another buyer.

Final Thoughts

Bottom line, the housing market isn’t going anywhere anytime soon. If you’re ready to take advantage of the low interest rates and to find the perfect home, contact me. I’ll help you find your dream home and win the bid in the competitive market we’re experiencing today!