Buying a house is one of the most cherished dreams of Americans. It needs a huge investment. And so, your savings might seem inappropriate to buy the home you like the most. In such a scenario, none but a home loan can help you to realize your dream of homeownership. However, to get a home loan, you have to consider several things. And one of the most important of them is a credit score.
The mortgage lenders will check your credit score before approving your loan application. But that does not mean that you will not get a home loan, you will not get a home loan. Nowadays, there are several lenders, who offer 500 credit score home loans in Houston. You can opt for one of them and apply for the home loan. But before that check out 3 C’s of credit scores and how they can help you to be a smart homebuyer.
- Character
Nowadays, the character of a person is measured by his or her credit score. From your credit reports, a lender knows about your credit accounts, as well as transactions. By looking at your credit report, the lender can learn how often you make payments on time and how many accounts you have in good standing. Knowing what goes into your credit scores, as well as reports, can be the first step to improving them so that you can make a good impression on potential lenders.
- Capacity
Your capacity refers to your financial ability to repay the home loan. The lenders might review your most recent federal tax return, along with several pay stubs and bank statements of a few months, in order to verify your income. Moreover, the lenders will also check your debt-to-income ratio. This metric helps them assess how much extra debt you can handle and how much of a credit risk you pose. In order to figure out your DTI ratio, first, add up all your monthly debt obligations and then divide the sum by your monthly pretax income.
- Capital
Capital refers to the money you have left after purchasing a home, along with any other investments, properties and other assets that you can liquidate. You may ask why it is important. Although a home is the largest purchase that you make in your life, the mortgage lenders generally don’t want you to clean all your bank accounts to buy a house. Oftentimes, the lenders will frame your savings in terms of a certain number of mortgage payments that you have in the bank. However, the specific number they want to see vary from a lender to another one.
Besides the mentioned ones, the C’s that are often associated with a credit score are collateral and conditions. And last but not least is confidence. Knowing the five C’s give you confidence and ensure that you get a home loan even with a low credit score. As you are now familiar with all these, without waiting any more, opt for a lender and get the loan approval early so that you can start looking for your dream home.
Author Bio: Joan Gallardo, a Senior Loan Officer, with 20+ years of experience, here writes on 2 questions to ask the best mortgage lender in Houston when you are about to choose one of the first time home buyer programs in Houston.