Home Buyers--Winning the Interest Rate Game!

Buying a home is one of the biggest expenditures most people will make in a lifetime. And in many markets where sellers are offering attractive incentives to buy your next dream home, a first-time buyer can be intimidated by the whole decision making process. As important as this life-changing, buying decision can be, it is often as easily influenced by emotions, anecdotal experiences from friends and family, as well as more practical matters such as income, credit, down payment saved and other financial criteria. Too often first-time buyers start the buying process by "putting the cart before the horse" by becoming emotionally involved in the transaction without doing their financial homework first.

Once you have begun your home search by looking on the internet on websites like www.realtor.com for houses in the neighborhood you desire to live in or by writing down phone numbers from a "For Sale" sign, it’s a good idea at this time to take a look at your own financial picture as well. While not difficult, taking the time to get solid financial information, namely your credit report and debt-to-income ratio, will pay off in the long run as this data will influence what you’ll be able to afford and what type of mortgage you will qualify for.

There are several websites such as freecreditreport.com and myficoscore.com which enable you to take a look at your own credit report for a nominal fee. Make sure that you also request your FICO score, a three-digit number which ranges from a low of 350 to a high of 850, and is calculated based on assigned numerical values for certain credit characteristics. The higher your overall score, the less risk there is for the lender, and therefore the better interest rate that you are more likely to get. Typically, a number at approximately 620 or above is a fair credit score. In addition, under a new Federal law, you have the right to receive a free copy of your credit report once every 12 months from each of the three nationwide consumer reporting companies. To request your free annual report under that law, you must go to www.annualcreditreport.com.

While lenders often use their own credit reporting agencies, most of the data comes from the three major consumer financial gathering data organizations such as Experian, Trans-Union, and Equifax. Taking the time to investigate your credit gives you a clear idea of your credit standing and will point out any potential problems you may be able to work on before you meet with the bank or loan officer.

Problems or high risk credit characteristics usually include the following; bankruptcy, derogatory public records, late payments, charge-offs, repossessions, and serious delinquencies which are examples of negative factors that can directly affect your credit score. Even carrying high balances on your credit cards can appear as a negative factor. Although you may know without a doubt that you have not encountered these problems, pulling your own credit report will give you greater flexibility and knowledge as to what type of loans you will be able to qualify for and what type of interest rate you can expect to get. As the saying goes, forewarned is forearmed.

Unfortunately, too many potential homeowners who have already fallen in love with the home of their dreams are too anxious to get information on a loan they may qualify for and often get their credit reports from several lenders. Unfortunately, they do not realize that several inquiries into their credit can negatively affect their overall credit score thus affecting the interest rate they could have qualified for. So, taking the time to check out this information yourself can reap you enormous benefits in saved time, reduced hassles and a checklist of things you might need to work on before you take the next step in the buying process-getting preapproved for a loan.

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