The first thing most first-time homebuyers want to know is, how much can I borrow? Is my credit good enough to get a mortgage at a low-interest rate? How can I find out if I qualify for the amount of money I want to borrow?
Portland Realtor Megan Hannah has a strong belief that real estate can change lives and futures for the better. With a background in advertising and photography, her unique blend of skills is perfectly suited to making sure her clients get the kind of caring, thorough, and professional real estate help for their home purchases or sales. If you’re buying in the Portland, Oregon, area, contact her first to get answers to all your home buying questions. Here, she offers advice on how to get your credit ready to get the best deal you can on your next mortgage.
Your Credit Score
Your credit score is based on several things, like the amount of debt you have, if you’ve paid on time or been delinquent, and if there are any write-offs or delinquencies. Credit scores are figured from Poor (300-579) to Exceptional (800-850). If your credit score is below 620, you will likely be refused a conventional mortgage. For an FHA or VA loan, that score will have to be 580 at least, though a higher score will get you a better interest rate on that FHA or VA loan.
The three credit reporting agencies, Equifax, TransUnion, and Experian, will give you a free credit report once every 12 months but they will charge you to get your score. You can obtain your credit score for free from several different sources. Checking your own credit does not affect your credit rating, but inquiries from loan and credit card companies will temporarily lower your score. Your bank may offer to supply your credit score to you free of charge too, so check with them first.
Improving Your Score
After getting your report, check for any errors you find and dispute them at once. The entity whose entry you’re disputing will have 30 days to respond. According to the FTC, the number of errors in reports is alarming, so make sure one of those isn’t affecting your score. Pay off, but don’t close any credit cards you can, and lower the balance on those where you’re over 50% of the maximum limit. If you’ve made some positive changes to your credit, you can ask for a rapid rescore. That can lift your score by as much as 100 points in a matter of days.
A financial advisor can help you with raising your score and improving your report while helping you find ways to save for your mortgage costs. It is well worth the investment in the long run because they may be able to save you many times over the fees you’ve paid them.
If You Own Your Own Business
If you are a sole proprietor of your business, you are liable personally for any negative occurrences with your business. Structuring your business as an LLC will protect you from that while at the same time lowering your tax burden. It involves less paperwork too and filing it yourself will save you attorney fees. The laws vary state-to-state, so check into how to file in Oregon.
Purchasing an As-Is Property
If your credit score still hasn’t improved enough to get you an affordable interest rate, look into buying a property that is being sold as-is. If a home has structural problems, termites, or leaky plumbing, the seller will not be responsible for those repairs before you purchase. It’s tempting to jump on such property because of the low asking price. But get a home inspection first, to assess the number of repairs needed, the cost of having them fixed, and if those costs will give you the return on the investment to make it worth your while. Again, a qualified realtor will be your best resource for helping you with that analysis.
However, it’s worth mentioning that you may need to pay cash for your as-is home, as banks are often hesitant to loan money for this type of purchase. Although you could apply for a rehab loan, you’ll need a very high credit score in order to qualify. So, make sure you do plenty of research before you set your sights on a home that needs a little work.
Managing debt is difficult when unexpected occurrences force us to use our credit more than we’d like to, but fixing it isn’t impossible. It will take some work, though, but in the end, you’ll be so glad you did it.
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