A common issue that blocks many potential buyers from purchasing a home is their credit score. What does a lender consider when determining a good borrower?
Typically, they look at four key factors. Collateral — the value of the property your looking to purchase. Banks determine this through an appraisal. Appraisals are independent, done by a third party not connected to the transaction. Character– How you pay your bills. Do you pay on time? Do you wait until you get notices? Important to try and pay your bill in a timely manner if you want to purchase a home. Capacity– Your ability to repay the loan. Do you earn enough money to afford the home you want? Banks can differ slightly on how they evaluate this and many factors can come into play. Lastly, Credit– how you manage your debt.
These are the core factors that lenders review. Definitely important that you review these factors before you start your home search. I’ve worked with many buyers that love a home but did not know their credit was in tough shape or had forgotten to pay some bills. Good luck !