Many markets around the country are booming right now and there are a lot of millennial's and first-time homebuyers hitting the market. Now is a great time for so many reasons; rates are still extremely low, there's a good selection of properties on the market, and it's not that easy to buy a house. The last one might have you stumped; why would I say that? Well, in 2006 and 2007 we had the same type of perfect storm: low rates, lots of houses and it was easy to buy. The problem with that is that people that couldn't afford a house were buying homes and before we knew it the subprime mortgage bust caused a housing market disaster. People are losing their houses, the market tanked, houses now had more money owed on them than they were worth, and we were in a major recession.
The good thing about it being a little bit harder to buy a house right now is that lenders are being stricter with the requirements making sure that all borrowers can actually afford the home, not just do anything they can to get the buyer in the house. That's what we saw about 10 years ago and that's not a good place for people to be. People were maxing out their credit cards for downpayments, and overextending themselves on monthly payments. Many people paid more than 60% of their monthly income towards your housing costs, which is just ridiculous.
Now, lenders are looking for no more than about 40% of income going towards the housing cost including mortgage, taxes, and interest. This keeps things affordable and keeps people in their homes.
Because of this, borrowers need better credit ratings than ever before. It doesn't mean you have to be perfect but there are some great ways to rapidly increase your credit score over the next few months so you can get a better way home purchase. If you are planning on buying a home or even refinancing this next year, here are some excellent ways to increase your credit score.
Shoot for perfection or just thereunder. A perfect 850 credit score is the best that you can get but that's almost impossible so if you can shoot for 750.A credit score of 750 will get you a good interest rate and great terms. 750 is kind of the magic number for many lenders and creditors. It puts the ball in your court rather than the lender.
Keep your longest credit card. Lenders look at the length of time you've had credit with a source. The longer the better, especially if it's paid off. Work at paying off your credit cards and revolving credit and make sure you don't cancel cards that carry no balance. This looks like you have a lot of available credit.
Pay all bills on time - or earlier. Set up automatic payments if you can. 35% of your credit score is taken from your payment history. Make sure there is enough cash in your account to pay all the bills on time; a late fee could drop your score.
Don't worry about the score if you really want a house. If you find a house you love and your score isn't exactly where you want it to be, that's okay. You can always buy now, refinance later when you have a better score. If you can handle the payments and you find a house you love, that's the whole idea.
Ready to buy or just have more questions? Give me a call! Vision Realty offers expert representation throughout the Columbus real estate market.