It may seem not very safe to plan a budget and save money for a home purchase. But it’s not. To ease your concerns, it’s important to understand the costs that you will face upfront. To do this, you should always seek out trusted professionals. You can set up a strategy and look at the budget and process before you start.

You might have been thinking about purchasing a home as the new year draws near. You can never start too early in preparing for this exciting goal. Building a good credit score is a crucial part of preparing for home ownership.

Lenders will review your credit score to determine your ability to pay on time, repay debts, and more. Your credit score is also used to determine your mortgage rates. This is explained in an article by CNBC.

A higher credit score will save you thousands in mortgage interest. Your credit score has a direct impact on your mortgage rate. This determines how much interest you will pay throughout the loan.

Your credit score is even more crucial to your plans for home buying right now, as mortgage rate is a major factor in affordability.

According to the Federal Reserve Bank of New York, the median credit score for Americans taking out mortgages is 780. It doesn’t have to be perfect. An article by Business Insider describes, in general, how your FICO range can have an impact.

“. . . You don’t have to have a perfect score on your credit report in order to purchase a home. . . . If you want to qualify for the best mortgage rates, your score should be in the “Very Good” range (740-799).

There is no single “cutoff score” used by all lenders. Each lender uses their criteria, such as the risk level they find acceptable. There is no “cutoff” score that all lenders use. They may also consider other factors to determine the actual interest rate .”

You may be interested in improving your score. Experian highlights a few things that you should consider:

• Payment History: Delays in payments can negatively impact your score. Pay your bills on time, and pay any late fees that may have already been accrued.
• Your debt amount (relative to your credit limit): The less credit you use, the better. Keep this number as low and as manageable as possible.
• Credit Application: Do not apply for more credit if you are looking to purchase something. If you apply for a new credit card, this could lead to a hard credit inquiry that lowers your score.

Lenders will guide you through the entire process, from determining your credit score to explaining the details of each type of loan.

Bottom Line

When you decide to buy a house this year, you should focus on improving your credit score. This will help you obtain a lower mortgage rate. Connect with a lender if you’d like to know more.