Buying a home can be one of the best experiences of your life. However, if you have poor credit, it can be a frustrating and disappointing experience in your life. Let's take a look at why your credit score can make a difference in how you work through the process of trying to buy a home.
1. Those with Good Credit Generally Have the Most Options
If you have good credit, lenders are going to be open to giving you the best loan terms to fit your needs and budget. Some perks may include getting a traditional loan with less than 20 percent down or at an interest rate lower than one advertised on television or online. Some lenders may have fewer documentation requirements for those with credit scores between 700 and 800 because they have proven an ability to repay debt in the past.
Knowing that you are going to get your loan application approved makes it a lot less stressful to buy a home. Knowing that you can do so without having to provide a lot of personal information makes the process even easier. While you may be required to show pay stubs and proof of employment even if you have good credit, there may be little or no need for additional paperwork.
2. Those with Poor Credit May be Stuck Working with Substandard Lenders
Whether you work with a mortgage broker, a large bank or a local credit union, you need to know that you will get a loan with fair repayment terms. If you have to work with a lender that specializes in subprime loans, you may wind up with a loan with prepayment penalties or other terms that make it impossible to get out of it outside of foreclosure or bankruptcy.
If you do have poor credit, you may want to consider working with a credit repair agency such as Lexington Law Reviews that can help you get a handle on your current credit situation. Once you know what why your credit is so poor, you can start making better decisions with your money and get your score where you want it to be.
3. Where Does the Money for the Loan Come From?
Your credit score may make it unlikely or impossible to qualify for a traditional loan, which means you have to turn to a government loan. This could make the process of getting your loan a longer one because you may need to apply for grants or other credits that are offered by the government. However, as part of the process, you may need to go through credit counseling sessions or other classes to teach you what it means to be a financially responsible homeowner. While this could be beneficial for you in the long run, it could prolong what may already be a long enough process for many borrowers.
4. Credit Score and Housing Options
Blemishes on your credit report could stonewall your opportunity to buy the home you want, since your credit score could put a damper on how much you are able to borrow. This would limit your chances of finding the home that you really want. Although you could find something that you like, it may not be your dream home or in an area where you really enjoy living. When you know that you can't live where you want, it may take some of the joy out of moving out of an apartment or a family member's house and into your own place.
While buying a home can provide stability in your life, your credit score may make the process of buying a home unpredictable. Therefore, it may be a good idea to review your credit before beginning the process to ensure that you know exactly what you are getting into.
About the author: Anica is a professional content and copywriter who graduated from the University of San Francisco. She loves dogs, the ocean, and anything outdoor-related. She was raised in a big family, so she's used to putting things to a vote. Also, cartwheels are her specialty. Anica writes on behalf of Lexington Law Reviews, which provides credit repair services for consumers.
I know first hand from dealing with my clients how a poor credit score can hinder someone from buying the house they really want. People must understand what their credit score is and how it effects their lives.