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How does your credit score affect the home buying process?

When you’re searching for golf homes for sale in Scottsdale, there are a lot of factors that go into deciding on the right home for you. Location, size and amenities all come into play, but how much you can or want to spend will really direct your search.
If you are planning to obtain financing for any portion of your new dream home, it’s important to know how your credit score will affect the home buying process.
First the basics: Your credit score is a number assigned to you based on your credit history. Your credit history includes everything from open and closed credit accounts, including loans, to the amount of available credit you have across all accounts and your available credit to debt ratio. As your credit history can change constantly, so can your credit score. There are three main credit bureaus that can report your credit score: Equifax, TransUnion and Experian.
A FICO score in particular is a type of credit score that was developed by the Fair Isaac Corporation. Your FICO score is assigned at the moment your credit is pulled and is based on information reported across all of the credit bureaus. This score typically ranges from 350 to 900 with a high score indicating the most “credit worthiness.”
When you apply for a home loan, lenders evaluate your application during the underwriting process. Based on the information provided in your application, such as your income and credit history, they are essentially evaluating your ability and willingness to repay the home loan. Your income lends to your ability to afford the loan (in conjunction with your other financial commitments) and your credit history, or credit score, tells lenders how likely you are to pay on the loan and keep it in good standing.
Home loan lenders hold your credit score in very high regard when considering your application. Your credit score will play a strong role in the price of the loan, which is the loan amount plus interest and points that the lender will charge. A higher credit score will help you get a lower priced loan. A very low credit score may make it difficult to secure a loan, even at a higher interest rate.
Of course we know that everyone’s home buying situation isn’t reflected in just a number. During underwriting, lenders will also take into account factors like the down payment, type of property, equity in the property, value of the property as compared to similar properties in the area and the types of loans available or requested. These factors fluctuate between markets and areas. The bottom line is that lenders are looking for the greatest incentive for you to repay the loan. Credit scores have proved to be a very strong indicator of this, but how much equity you have in the property and the property’s value can also be strong indicators for loan repayment.
It’s a good idea to check your credit score and get your finances in good order at least three months before applying for a home loan. As you are going through the home buying process, avoid any big financial moves that could impact your credit score (and thus your home loan), like buying a car or closing a paid-off credit card account.
Shopping for Scottsdale golf homes is an exciting endeavor, and entering it with a good FICO score will make it an easier process. If you have questions about preparing to buy a home or which AZ golf communities are right for you, contact The Matheson Team. We’re experts in AZ golf homes and will stand by you every step of the process!
Don Matheson
Realtor | Founder
The Matheson Team – RE/MAX Fine Properties
21000 N. Pima Rd., #100, Scottsdale, AZ 85255
[email protected]
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