Lewis Herring

It is the American Dream to own a home. However, a purchase this big doesn’t happen overnight. You will have a better home buying experience and you will secure better mortgage loan terms if you are prepared. You want to have your finances in order. This includes cutting down on debt, saving up for a higher down payment and building a higher credit score. It’s this last topic we want to focus on today because it is a question we get a lot at Moreira Team.

Securing the Best Mortgage Rate

Ultimately, your goal with a mortgage is to lock in the lowest rate possible. The better your financial standing, the lower rate you will be able to secure through a mortgage lender. They are qualifying you and taking a risk by approving your loan. When your financial situation is strong and you have a good credit history, you present less of a risk. This will work in your favor when applying for a home loan.

Review Your Financial Standing

Before you even start looking for a house, you should review and improve your financial health. This includes doing what you can to boost your credit score. If your credit history shows a lot of missed or late payments or you don’t have much of a credit record, it will work against you. Having credit cards, student loans, bills and car loans can all be beneficial toward your credit rating as long as you pay your bills on time. Having no credit history is actually a detriment when buying a house, even when your other financial components are strong.

How FICO Scores are Calculated

Before you can buy a house, it is important to establish a good credit history and work to get your credit score (also known as a FICO score) higher. These steps will go a long way toward helping you get approved for a mortgage loan while also securing the best interest rate. Below are the factors that matter most when it comes to your credit score when applying for a home loan. These are listed in order and the percentages reflect how much each factors into your total FICO score.

Credit Payment History – 35%

Your Amount Owed (Current Debt) – 30%

Length of Credit History – 15%

New Credit – 10%

Type of Credit Used – 10%

Credit Score Requirements for Mortgage Programs

So in Atlanta, what credit score needed to buy a house? The answer isn’t super simple because the score requirements can vary with different types of home loans.