Home ownership is a goal for many people in Texas and throughout the country. Purchasing real estate is a costly endeavor, and few individuals can buy the property outright. Part of purchasing real estate is having a credit score that will lead lenders to decide an applicant is a worthwhile risk.
Understanding important points about a credit score and what it entails are important when beginning the process. There are myriad factors that contribute to a credit score, including a person’s age, history of credit use, payments, debt and if there were new inquiries about the credit. Credit scores can be improved over time. Even a person with weak credit can purchase real estate if he or she takes certain steps, including saving money for a larger down payment of 20% or more.
Tactics for improving credit
For those capable of doing so, paying off debts as quickly as possible will inevitably improve their credit score. Having weak credit does not preclude a person from buying real estate, but there will likely be a higher interest rate, and the odds are relatively low that he or she will be able to secure a mortgage. Recent statistics show that people with a credit score of less than 620 were only able to buy a home in 19% of the cases. If the credit score is not a minimum of 500, the person will be denied. Credit scores can be improved, but the issues that led to the low credit score will be critical factors.
People rarely realize that the simple act of closing an account can harm their credit score. A fundamental way to improve a credit score is to lower the ratio of debt-to-income. Working more, paying more of the debt, not applying for new cards and not closing accounts can be helpful strategies.
Real estate is a big investment
Since real estate is one of the biggest purchases a person will make in his or her life, there are many factors to consider, including credit scores, being aware of all the details of the property, addressing disputes and knowing the implications of the purchase. A law firm with experience in real estate may provide guidance and advice.