In a seller’s market, FICO scores remain one of the most important elements financial institutions use to determine credit worthiness. In fact, mortgage lenders routinely check FICO scores to pre-qualify and then pre-approve borrowers as a first step in the home buying process. In this blog post, we will review the basics of credit score calculations as well as the ways that the all-important FICO ratings can affect your home-buying life.
What is a Credit Rating? The Basics
Using credit is borrowing money with the promise of paying it back within a specified period of time. Credit scores are the result of statistical calculations used to determine how likely an individual is to repay what he or she has borrowed.
There are three major credit bureaus that collect information and calculate scores—Equifax, TransUnion, and Experian. Although each bureau has a unique way of calculating precise scores, each takes into consideration all of the information contained in a person’s credit report.
Primary factors used to calculate an individual’s credit score:
- Amounts owed (30%)
- New credit (10%)
- Length of credit history (15%)
- Payment history (35%)
- Credit mix (10%)
Buying a Home
One of the most important decisions you will make is where you will live. And if your credit scores are good, you will have a myriad of options available. But did you know that even if you rent an apartment, condo or single-unit home, you will need good credit to qualify? Property managers and mortgage lenders review housing and credit applications to make sure borrowers won’t default on leases or mortgages. So poor credit scores could result in a high security deposit for a rental, a high interest rate for a purchase—or worse yet—outright denial of an application or loan. And with interest rates at all-time lows, now is the time to buy. Put yourself in the position of being able to secure a loan by working to safeguard your all-important scores.
Unless you plan to pay entirely with cash, whether you are considering buying a first home or upgrading or purchasing investment property, your credit scores will affect your options. Those who wish to buy income property or second homes are judged even more harshly than their primary mortgage applicants, particularly with regard to debt-to-income ratios. So the best thing to do is to contact a real estate professional who can interpret FICO scores and income qualification and otherwise expertly guide you through the entire home-buying process.
Credit is not just used make housing decisions. FICO scores are evaluated when renters and owners apply to establish utility services such as electric, natural gas, landline, Internet service, cable, water, trash, sewer and cell phone. These companies effectively consider that their customers are borrowing one month of utility service, since most services are billed after use. So, before turning on power, they check to see if applicants have good credit. Those with low credit scores may have to come up with a deposit or even be denied service.
About SoCal Platinum Properties, Inc.
Real estate investing can be tricky—whether you are buying your first home, purchasing a vacation home, or upgrading from a starter. If you are interested in buying or selling property in or around San Dimas, California and the surrounding area, don’t get caught in a Catch 22 — owning two homes or none at all. We list properties and advertise them to guarantee a swift sale for maximum profit. We also assist home buyers as they hunt for, make competitive offers, and purchase residential property. Realize your dream of homeownership, reduce your house payments to free up funds for whatever purpose you see fit. We offer the following refinance options: We offer the following Refinancing Programs: FHA Streamline, FHA Cash Out, FHA 203k, VA Streamline, VA Cash Out, Conventional, Commercial and Jumbo loans. Lock in your low rate today (213) 709-5178.