Credit 101
Most of us, especially those who are in the market to purchase a home in the near future have some form of credit attached to their name. Establishing credit can start off as a slow process but as you continue to grow in your career and income, you will be able to grow your credit base as well as your score.
Your credit score is a reflection of your status in regard to your ability to repay back any debt you owe. The max score anyone can have is 850 but do not feel the need to get to the max score (mostly because most credit scores never hit that threshold anyway).
So you might be asking why credit scores have such a level of importance in the purchase of a home and the answer to that question is simply shown as a reflection of the ability to repay back your debts as well as the amount of credit you utilize in a given period. This score allows lenders and mortgage professionals to gauge a potential homebuyers ability to take on a substantial amount in the form a mortgage loan.
Now that we have the basis of credit scores established, let's break down the significance of how credit comes together in a housing transaction. Once the lender takes a look at your income from your job, the amount that you can afford and your ability to pay back that amount, you enter the phase of the transaction where you are discouraged to use your credit cards for a short time during the rest of the transaction.
What this means in a nutshell is that lenders do not want to see any major transactions made with your credit card because this will change the parameters of the approval of your loan. This can lead to the change of your credit score in some instances and it can cause also the transaction to be delayed because now the major purchase on credit needs to be reported to your lender. Basically, save all your furniture purchases and major acquisitions for your home after the green light has been shown in the transaction and you finally get the keys to your house. Most transactions these days do not take too long but that short time when you have funds in escrow will simply need patience on your part to get you across the finish line.
Save all your furniture purchases and major acquisitions for your home after the green light has been shown in the transaction and you finally get the keys to your house.
Credit is a major factor in a housing transaction coming together but if you exercise spending discipline in the middle of a transaction and make sure your credit score reflects your ability to repay back debt prior to making an offer on a home, you should be in good shape to get the keys to your next home!
