So, you’re ready to buy a home—but is your credit and financial situation ready too?
Buying a house isn’t just about finding a place you love. It’s about qualifying for the right loan, securing a good interest rate, and proving to lenders that you’re financially responsible.
In this post, we’ll talk about:
- How your credit score affects your mortgage
- What lenders look at before approving you
- The smartest ways to financially prepare for homeownership
Step 1: Understand How Credit Impacts Your Home Loan
Your credit score isn’t just a number—it’s your financial reputation. And when it comes to home buying, lenders use it to determine:
- If they should approve you for a loan
- How much money they’ll lend you
- What interest rate you’ll get
Here’s the deal:
- A higher credit score = lower interest rates = saving thousands over time.
- A low credit score = higher interest + stricter loan terms = paying more for the same house.
- Some lenders won’t approve you at all if your score is too low.
That’s why improving your credit before you apply for a mortgage is so important.
Step 2: What Lenders Look for (Beyond Just Credit Score)
Even if your credit is solid, that’s only part of the picture. Lenders also check:
- Your debt-to-income (DTI) ratio – How much debt you have compared to your income. The lower, the better!
- Your job history – A stable income makes you a safer bet.
- Your savings – Do you have enough for a down payment and emergency expenses?
- Your spending habits – Big purchases before closing can hurt your approval.
Pro Tip: Avoid taking on new debt (no new credit cards, car loans, or big purchases) while you’re preparing to buy a home.
Step 3: Start Saving NOW (Even If You’re Not Ready to Buy Yet)
You don’t need 20% down to buy a house, but you do need some savings to cover:
- Your down payment – This can be as low as 3.5% with an FHA loan.
- Closing costs – Usually 2-5% of the home’s price.
- Homeownership expenses – Property taxes, insurance, maintenance.
Even if you’re a year away from buying, start saving now. The more you have, the better position you’ll be in when it’s time to buy.
Final Thoughts: Be Financially Ready Before You Buy
- Your credit score matters—work on improving it before applying for a loan.
- Lenders look at more than just credit—keep your finances stable.
- Saving early puts you in a stronger position when it’s time to buy.
The key to homeownership isn’t just finding the right house—it’s making sure your finances are strong enough to secure it.
Watch the Full Conversation
Want to dive deeper into credit, loans, and financial prep? Watch this part of the discussion here:
Video Timestamp: 07:45 - 15:30
Buy the Book
In Part 3, we’ll break down the different types of home loans and how to choose the best one for you.
#Realtor #RealEstateAgent #FirstTimeHomeBuyer #InvestmentProperty