Buying or selling a home is a big financial decision and your credit score could affect what homes are available to you. Craig West with Berkshire Hathaway HomeServices Indiana Realty helps us understand how much your credit score impacts you.
A credit score is one of the most important financial pieces of purchasing a home. “Unless you have money stored away someplace that allows you to pay cash for a house, your credit score is one of the biggest, if not the biggest, factor in you being able to get financing for your home,” West said. “If your credit score is good, it could affect the interest rate you pay. If it is bad, it will affect your ability to get approved for a mortgage to buy a home,” West said.
Deciding to purchase a home versus rent property can also come with additional financial implications. As a trusted advisor, West guides potential first-time homeowners navigate the financial process of buying a home, and that includes some other additional costs that might not always be top of mind. “There are additional costs that come with buying a home versus renting. There are the real estate taxes and homeowner’s insurance that will affect their monthly payment so knowing your budget is key,” West said.
For a move-up buyer looking at financing is just as important. “There may be a higher utility cost in a larger house and those things can also affect them to get financing too because now it becomes the debt to income ratio.”
West recommends talking with a mortgage company to make sure everything is in place before you start looking, especially in this competitive real estate market.
“When you are competing with 6-8 different offers for the same property, you have to do the things that will position yourself as a good, preapproved buyer,” West said. “Talking to a lender is important so you know exactly what you will be comfortable with in a monthly payment.”
West also recommends setting aside money for other things next to the down payment. “I always say on closing day that this home is now your baby. If something goes wrong, it is up to you to fix it,” West said. “Things in the house can look good during the inspection, but we never know what is going to happen and that’s why we always want to make sure we advise our clients to have some money set aside.”