What to consider before buying a house

November 15, 2021 | 2 min read

Buying a home is one of the most important decisions that you will ever make in your lifetime.

As I’m sure you’ve seen or heard, given the recent chaos of the housing market, a solid credit score and current pre-approval are two necessities while shopping for a new home. Doing a little research into your current financial situation will help make you feel confident when the time to apply for mortgage rolls around.

For those of you who are not well-versed in credit scores, here’s the cliff notes version.

Credit scoring tells a lender or financial institution how diligent you have been while paying your bills. The higher your credit score, the better. This tells a lender that you’re not likely to default on a loan or forget to pay your mortgage. Also, the higher your credit score, the lower your interest rate will be!

The takeaway: pay your bills on time, and that 800+ score will be your pride and joy. You’ll be every lender’s favorite client.

If you’ve had a few hiccups (aka late payments), your credit score probably isn’t in the A+ category. Don’t despair. It doesn’t mean you can’t qualify for a mortgage, but it does mean your interest rate will be slightly higher. The minimum score required to qualify for a conventional mortgage loan is 620.

The takeaway: auto-pay is your friend. Set it and forget it.

Because buying a new house isn’t stressful enough as it is, there are also different types of “pre-approvals” a lender can provide you with prior to making any offers.

Pre-approval vs. Conditional approval

A pre-approval from a lender tells the seller and real estate agents that your credit score has been verified. Your income and employment are verbally verified at this point.

A conditional approval verifies your credit score, income, and assets through a direct underwriting system. This is a much more reliable and thorough process.

While shopping for a home, a conditional approval is a much better asset. This will assure the seller that you are already qualified to purchase and shows that you are a serious buyer. A conditional approval is especially great to have in today’s housing market, which is unbelievably competitive. Multiple offers and over-bidding galore!

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