Preparing to Buy a Home

After recent changes in the mortgage industry, it's become more important than ever to be prepared when you apply for a mortgage loan and occasionally I find a buyer who has "no credit" and therefore cannot qualify.

What does "no credit" mean? One method mortgage companies use to determine a buyers credit worthiness is to run a credit report from the 3 major credit reporting agencies. If a person pays everything in cash and does not have a current mortgage, car loan or credit card, there will be no information on that person and it will show "no credit."

How can paying cash for everything be bad? It seems like a good idea to demonstrate fiscal responsibility by only purchasing what you have cash to purchase but there is no traking method by which a lender can determine that you will pay your mortgage bill and pay on time therefore a person with "no credit" would be considered a high risk.

How can someone establish "good credit?" If you find yourself in a position with "no credit" you can establish "good credit" easily. Open a credit card account and every month make a purchase and when the bill comes pay it off on time. Over a period of 6 months, you will establish "credit." The longer you hold the card and continue to pay on time, the better your credit will become.

If you have any other questions about how to prepare to buy a house, email me at robin@robinscottrealtor.com

Austin, Texas. Robin Scott, BROKER. Certified Residential Specialist, Accredited Buyer's Representative, Seller's Representative Specialist. 512.589.7988.

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