Buying Your First Home Requires Good Credit

The American Dream has long included owning your very own home, and even in tough economic times, this remains true. Many people want to buy their own home, but they aren't able to afford it or will not qualify for the loan because of bad credit scores and mountains of debt. Unfortunately, many people don't even know the reality of their own credit score and how it can affect their ability to buy a home. By checking your credit report on a regular basis, you can make sure your credit score is at its best and avoid the embarrassment of being denied a home loan.

The Importance of a Credit Score

A credit score is an overall picture of your financial health, and it's one of the top factors a bank considers before lending you money. Your credit is built through the way you handle your finances, particularly how you handle your credit cards and loans. All of your major financial decisions are reflected in your credit score, so the more responsible you are, the higher your credit score typically will be. By paying off credit card balances in full each month and not falling behind on loan payments, you can help maximize your credit score. Your credit score is also based on how much debt you take on relative to your total financial standing. The only way to know for sure that your credit score is high is to check your credit score. If you perform a regular credit check, you can help make sure your credit score is where it should be.

When you have a good credit score, you will qualify for better loans. This means you can take out more money and get better rates on those loans. With mortgage rates still at historic lows, having a good credit score can have big advantages. The only way to qualify for these great rates is to be in good financial shape. However, there are still bad credit mortgage options for people with credit troubles who want to buy a house.

Qualifying for a Home Loan

Buying your first home is a huge financial commitment that is not as easy as it once was. After the housing bubble burst and the economy started to slide downhill, banks became stricter when it came to giving out loans of any type, especially home loans. Nowadays, it takes proof of a steady income, money for a quality down payment, and, most importantly, a good credit score that proves you are worth the risk. If you don't check your credit prior to applying for a home loan, you may go through the embarrassment of being turned down for a loan. This will force you to put your dream of home ownership on hold.

If you are planning to buy a home, you should check your credit score approximately six months before you intend to apply for a loan. This will give you enough time to correct any errors on your report. It will also give you time to make some financial adjustments that could help your overall credit standing. The best way to qualify for a home loan and good mortgage rate is by having the highest credit score you possibly can.

Check Your Credit Score Frequently

Checking your credit report on a regular basis is a responsible financial decision that can really help in the long run. You shouldn't just rely on the free credit reports that you are granted each year from the three major credit bureaus. While some people fear that a regular credit check can cause major damage to their credit, checking your credit does not actually hurt your credit score in a big way. Regular credit checks may shave about five points off your credit score, but this won't be the difference between a good mortgage rate and no mortgage at all. You should check credit scores several times a year in order to make sure there are no mistakes and that you are on a good financial path. Regular credit checks can also help keep your identity from being stolen.

One big frustration for first time homebuyers these days can be securing a home loan at a good rate. If your credit score isn't strong, you may not qualify for a home at all. It can be very embarrassing to be denied for a loan. In order to make sure your credit is as strong as possible, you should engage in regular credit checks. You can use these regular credit checks to catch any errors and make adjustments in your financial life that will help you boost your credit score so that you can qualify for the best possible loan.

Joy Mali is an active blogger who is fond of writing articles on Finance and advising people to monitor their credit history to ensure a clean and error free report. Follow her on Twitter to know more on buying your first home requires good credit.