Making Smart Decisions When Applying For A Loan

 

Navigating all of the different types of loans and what you can afford as you begin the mortgage process may get confusing. Home Point Financial Corporation is here to help. It is important to make smart decisions when applying for a loan, especially in regards to your credit score, so here are some quick tips!

Image via RealityTimes

You Ideally Want a Credit Score Above 675

First of all, you want a credit score that is attractive to lenders. Typically this number is around 675 or higher, 700 being optimal. A score around this number or higher tells lenders that you will make your mortgage payments on time and can afford to pay off your loan. Anything lower will be considered risky to lenders.

Determine How Much You Can Afford

You and your home buying partner (if you have one) need to sit down and determine how much you can afford. Typically, you should not be spending more than 28%-35% of your income on mortgage. You also need to think about what kind of down payment you can afford. The more you pay up front, the lower your interest rate will be.

Refrain From Opening New Lines of Credit

When you are preparing to apply and shop around for a mortgage, it can be a risky move to open up new lines of credit. When in the process of getting a loan, you want your credit history to look strong and stable. Opening new lines of credit or making a big purchase (such as a car) while in the loan process is a red flag for lenders.

Lower Credit Score = Higher Mortgage Payments

If you have a low credit score, your mortgage payments will be significantly higher than if you were to have a good credit score. This may put unnecessary financial strain on you from month to month.

So, It May be Beneficial to Work on Your Score First

If your score is less than ideal, it may be best to work on improving your credit score before looking for a mortgage lender. Easy ways to improve your credit score include making credit card payments on time, keeping balances low on credit cards (don’t just pay the minimum due), pay off debts, and avoid opening more lines of credit than you need.

 

Barbara Grogg                                                Direct: 717-991-8388

Branch Manager/Mortgage Advisor                 Efax:  215-525-9663

NMLS 535271                                                                barbara@barbaragrogg.com

3500 Market Street, Suite 206                                 www.barbaragrogg.com

Camp Hill, PA 17011                                                   View my LinkedIn Profile

 

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