What About Credit History?

When a lender looks at your overall financial profile, your credit rating is an important consideration in qualifying for a home mortgage. If you have a history of paying your monthly obligations on time, that's a signal to a lender that you are likely to make your monthly mortgage payments on time as well.

So your credit or "FICO" score can be a factor in the kind of mortgage program you may qualify for.

Your credit history can also affect the amount required for a down payment, the amount of money you can borrow in relation to your income, or even the interest rate you are offered. But keep in mind that even if you have no established credit history or less-than-perfect credit, there are still loan programs that can help you buy a home.

If you haven't done it already, my Mortgage specalist can help you get a copy of your credit report. And here are some steps you can take to establish or improve your credit rating:

• If you've always paid cash or used checks to make purchases and haven't established a credit record, it's a good idea to do so before you buy a home. You can use credit to purchase low-priced items, make one or two prompt minimum payments and then pay off the balance.
• Some loan program guidelines allow "alternative" credit records. If you have a limited credit history, your paid receipts and canceled checks for rent and utility payments can help you document a pattern of paying your monthly obligations on time.
• If you already have outstanding loans or credit card debts, try to pay off as many as possible. The amount of monthly debt you are responsible for paying reduces the amount of money mortgage underwriting guidelines will allow you to spend on housing each month.
• Did you know that even if you are a consistent, on-time bill payer, you can damage your credit rating if you have a lot of credit cards with large credit lines? Even if you don't use certain cards, or the full amount of your credit line on others, just having them can lower your credit score! You may want to close some accounts before you apply for your mortgage.