Mortgage 101
March 30, 2023

How Building Credit is the Key to Homeownership

Estimated reading time: 2 minutes

Your credit is one of the first things a lender will examine when you apply for a mortgage. Your credit score and credit history are key factors in qualifying, pre-approval, and obtaining a desirable interest rate. Additionally, each loan program has minimum credit score requirements. By taking positive steps to improve your credit early, you can be confident when it’s time to submit your application.

Request and Review Your Credit Reports At Least Once a Year

At least once a year, be sure to check your credit report from all three credit bureaus. Just as an annual physical helps you and your physician understand your physical health, knowing your credit score and the specifics of your report will help you be more financially healthy. When you examine your report, ensure you recognize all the open accounts and inquiries being made.

Make Payments on Time and Pay Down Any Debt

Your payment history is about 35% of the calculation of your credit score and can affect your debt-to-income ratio (DTI). Your DTI is measured to determine how likely you are to make your monthly mortgage payments. If you struggle to pay on time, experts suggest setting up autopayments for your accounts.

In addition, be sure you get late payments or delinquent accounts resolved as soon as possible so your credit has time to recover. By keeping debt low, you’re demonstrating to your lender that you’re less likely to default on your mortgage.

Keep Your Accounts Open

Even if you no longer use your credit card or account, experts recommend keeping the accounts open. Canceling your account will make your available credit go down for a period. For example, let’s say you had a card with a $3,000 limit but carried no balance. If you were to close the account, your credit score would reflect that you have $3,000 less of available credit.

Get Enrolled in Credit Coaching

When you work with a Loan Originator from Homestead Funding, speak with your Loan Originator about enrolling in credit coaching. While we are not credit repair specialists, our Loan Originators can offer assistance for our borrowers from a Fannie Mae approved platform.

A young family running into their home.

At Homestead Funding, it’s not a no, it’s just “not yet.” We want to help you get into your dream home, even if it’s not tomorrow. With the right credit counseling, you can become confident and improve your credit in as little as four months! To get started, contact us today. You’ll be matched with one of our knowledgeable Loan Originators that will work hard to get you to the closing table.

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Homestead Funding offers exceptional customer service and a convenient mortgage process. Whatever your financing needs, our goal is to exceed your expectations.