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2016-09-16 16:15:08
First Time Homebuyer: Steps to Success (Step 1)

It may not seem like it, but there is a process to buying a home and taking certain steps in the proper order just about guarantees success. Taken out of order – putting the cart before the horse – the steps are inefficient and counterproductive, and the process becomes chaotic.

Remember when you were learning algebra? If you tried to take a shortcut, you would get the wrong answer. The steps are there for a reason, and they simply must be followed, in order, if you’re to be successful.

Over the next three posts, we’ll take a look at the three steps you must take before looking at even one home for sale.

Today we look at the first step: Figuring out where you stand financially. If you’ll need a mortgage loan, this is the most critical step in the process and it can make or break your house budget.

Step 1: Check Your Credit

When faced with a loan application, the first task on a lender’s to-do list is to order the applicant’s credit reports and determine his or her credit score. This score is produced by Fair Isaac Corporation – and is known as your FICO® score. This score not only reflects your credit risk but will be used in the determination of the interest rate you’ll be offered.

Calculated from the data in your credit reports, FICO® credit scores range from 300 to 850 and FICO® uses five categories in the calculation:

  • Payment History: FICO bases 35 percent of its score on your payment history.
  • Account Balances: 30 percent of your score is based on your current account balances, listed in your credit reports.
  • Length of Credit History: This category is used to determine 15 percent of your credit score.
  • New Credit – 10 percent of your credit score depends on new credit obtained.
  • Types of Credit – the types of credit you use accounts for the final 10 percent of your FICO® score.

This formula is not set in stone. People who have short credit histories – young people for instance – are weighted differently than those with long credit histories.

You are entitled to a free copy of your credit report from each of the three major credit reporting agencies once a year. Make sure you order the reports at AnnualCreditReport.com, the only site authorized by the federal government.

Next time, when we take a look at Step 2 in the home-buying process, you’ll learn how to clean up your credit and raise your score.




Blog Archive
2016-09-16 16:23:17
The Home-Buying Wish List

2016-09-16 16:22:40
3 Common Home Buying Myths

2016-09-16 16:21:15
3 Tips for Attending Open Houses

2016-09-16 16:20:51
2 Things to Consider Before Buying a Townhome

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4 Tips for Home Buyers with Boats

2016-09-16 16:20:16
2 Tips for the Luxury Home Buyer

2016-09-16 16:19:58
What is a Buyers Market?

2016-09-16 16:19:38
Writing a Strong Offer

2016-09-16 16:19:15
3 Important Aspects of the Purchase Agreement

2016-09-16 16:18:26
3 Things to Know about Buying New Construction

2016-09-16 16:18:09
2 Things to Know about Home Inspections

2016-09-16 16:17:58
What to Look for in the HOA Documents

2016-09-16 16:17:44
HOA? Beware the Rules and Regulations!

2016-09-16 16:17:16
Everything you need to Know about Home Warranties

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4 Tips to Close Quickly on a Home Purchase

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Your Moving Checklist

2016-09-16 16:15:58
Buying your First Home? Avoid these 4 Common Mist

2016-09-16 16:15:35
Tips for Buying a Fixer-Upper

2016-09-16 16:15:08
First Time Homebuyer: Steps to Success (Step 1)

2016-09-16 16:14:37
First Time Homebuyer Steps to Success (Step 2)

2016-09-16 16:14:15
First Time Homebuyer Steps to Success (Step 3)

2016-09-16 16:06:37
How much can you afford?

2016-09-16 16:06:08
The Essential Real Estate Glossary

2016-09-16 16:05:48
What is the Earnest Money Deposit

2016-09-16 16:05:10
Home Appraisal Basics

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