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How credit influences your home financing options
One of the most important steps in buying a house is financing the purchase. Your credit is one of the first things that lenders examine when considering you for a loan. Making payments on time is the most important way to establish good credit. A pattern or history of frequent late payments can lead to a poor credit score that could negatively affect your ability to be approved for future loans, or result in home financing at a higher interest rate. Conversely, having a good credit score will let you secure a home loan at a lower interest rate.
Your credit report
When you are being considered for a home loan, mortgage lenders will review your credit report, which displays your credit history and credit score. Your credit score, also called credit rating, is based on a summary of your overall credit history. It is shown as a number that provides lenders with a fast and objective way to predict how likely you are to repay a loan.
Lenders use your credit report to decide on the following:
· Whether or not to approve you for a loan
· The type of loan for which you qualify
· The interest rate to charge you
The importance of good credit
Your credit history will follow you throughout your life. Therefore, making good credit decisions along the way will help a great deal when you're ready to realize the dream of home ownership.