Joel Margolis' Blog
21 Hodgkins Road, Rockport, MA 01966
It’s hard to overstate the importance of credit scores when it comes to buying a home. Along with your down payment, your credit score is a deciding factor of getting approved and securing a low interest rate.
Credit can be complicated. And, if you want to buy a home in the near future, it can seem daunting to try and increase your score while saving for a down payment.
However, it is possible to significantly increase your score in the months leading up to applying for a loan.
In today’s post, we’re going to talk about some ways to give your credit score a quick boost so that you can secure the best rate on your mortgage.
Should I focus on increasing my score or save for a down payment?
If you’re planning on buying a home, you might be faced with a difficult decision: to pay off old debt or to save a larger down payment.
As a general rule, it’s better to pay off smaller loans and debt before taking out larger loans. If you have multiple loans that you’re paying off that are around the same balance, focus on whichever one has the highest interest rate.
If you have low-interest loans that you can easily afford to continue paying while you save, then it’s often worth saving more for a down payment.
Remember that if you are able to save up 20% of your mortgage, you’ll be able to avoid paying PMI (private mortgage insurance). This will save you quite a bit over the span of your loan.
Starting with no credit
If you’ve avoided loans and credit cards thus far in your life but want to save for a home, you might run into the issue of not having a credit history.
To confront this issue, it’s often a good idea to open a credit card that has good rewards and use it for your everyday expenses like groceries. Then, set up the card to auto-pay the balance in full each month to avoid paying interest.
This method allows you to save money (you’d have to buy groceries and gas anyway) while building credit.
Correct credit report errors
Each of the main credit bureaus will have a slightly different method for calculating your credit score. Their information can also vary.
Each year, you’re entitled to one free report from each of the main bureaus. Take advantage of these free reports. They’re different from free credit checks that you can get from websites like Credit Karma because they’re much more detailed.
Go through the report line by line and make sure there aren’t any accounts you don’t recognize. It is not uncommon for people to find out that a scammer or even a family member has taken out a line of credit in their name.
Avoid opening several new accounts
Our final tip for boosting your credit score is to avoid opening up multiple accounts in the 6 months leading up to your mortgage application.
Opening multiple accounts is a red flag to lenders. It can show that you might be in a time of financial hardship and can temporarily lower your score.
A successful home selling experience is not a guarantee. However, if you prepare for the house selling journey, you may be better equipped than others to reap the benefits of a quick, profitable home selling experience.
Now, let's take a look at three tips so you can set yourself up to succeed during the house selling journey.
1. Identify Your Home's Strengths and Weaknesses
Your home has served you well for many years, yet your residence still has flaws. Fortunately, if you allocate time and resources to identify your house's strengths and weaknesses, you may find ways to improve your residence before you list it.
Consider the buyer's perspective – you'll be glad you did. If you take an objective view of your residence, you may be able to identify assorted home problems and correct them right away.
Also, it may be beneficial to conduct a house inspection. Following an inspection, you'll receive a report that outlines any underlying problems with your house. You then can use this report to prioritize home repairs and upgrades.
2. Establish a Competitive Initial Asking Price
As a home seller, it is important to do everything you can to establish a competitive initial asking price for your residence. Thanks to a home appraisal, you can gain the insights you need to price your house appropriately.
During a home appraisal, a property expert will evaluate your home and various real estate market data. Next, this property expert will provide you with a property valuation. With this property valuation in hand, you can set an aggressive initial asking price for your house.
Maintain flexibility with your home price, too. And remember, if you upgrade your home before you list it, you may be able to receive multiple homebuying proposals at or above your residence's initial asking price.
3. Collaborate with a Real Estate Agent
For those who want a helping hand throughout the house selling journey, it may be a good idea to hire a real estate agent. Because if you have a real estate agent at your side, you can receive comprehensive support at each stage of the home selling journey.
A real estate agent is happy to teach you about all aspects of the house selling journey and ensure you can plan accordingly. He or she can help you identify your house's strengths and weaknesses, price your home appropriately and much more. Plus, once you list your residence, a real estate agent will set up home showings and open house events to promote your property. And if you receive an offer to purchase your house, a real estate agent will help you analyze this proposal and make an informed house selling decision.
If you want to take the guesswork out of selling your home, you should start preparing today. By taking advantage of the aforementioned tips, you can plan ahead for the house selling journey and set yourself up for a successful home selling experience.