Before you are at that point of seriously looking at houses and applying for your first mortgage, have a deep look at your credit score.
Pulling your credit report can be very inexpensive or even free. Most likely, everything will look satisfactory to your mortgage lender. But there is no reason to wait until that time to find out that your score could be better and in-turn get you a better rate.
Checking early works in your favor because that way you have time to build up or correct your score so it is at the highest point when you go for your mortgage.
Here is a breakdown to help you know where you stand: 650 or more will get you a half-decent rate. 680 or more will improve things but may bar you from A level lending. 720 and up will get you the lowest rates available (other factors still apply, but these numbers will help you know where you stand.)
As of this writing, the difference between the lowest rates and the half-decent rates could be as high as 0.15 per cent on a five-year fixed-rate mortgage. On an average mortgage with 10 per cent down, this equates to about $55 a month more out of pocket.
Your credit score allows lenders to assess the risk that you as the borrower may not repay debts or not pay them in a timely manner. Other aspects of your life may also be impacted by your credit score. Employers and landlords are increasingly asking for credit reports as part of the application process.
One of the most important factors for building strong credit is making payments, even if it’s just minimum payments on a credit card. The second biggest factor is available credit. If you have multiple empty credit lines and credit cards consider cancelling them and waiting for your credit report to reflect that.
While utilities like electricity and heat are not factored into your credit score, repayment of student loans and paying your cellphone bill are.
If your score isn’t where you want it, plan on about a three to six month timeline to build it up. Sometimes it can be done even faster, consult with me today for more information.