Understanding Credit & Mortgages

Credit Basics

Credit is money you borrow to pay for things.

Credit is usually referred to as a loan because you make a promise to pay back the money you borrowed plus some interest, which is the cost of borrowing the money.

Good credit means you make your loan payments on time and repay the money you owe. If you have a good credit record, it will be easier to borrow money in the future.

A credit record that shows problems will make it harder, and possibly more costly, for you to borrow money in the future. If possible, pay off your bills entirely each month. Pay them on time to avoid late fees and to protect your credit.

You do not need a perfect credit record in order to purchase a home. Even with past credit problems, you may still be able to buy a home.

Get Pre-Approved

Before you can begin to search for a new home, you need to determine your budget and estimate how much you can afford.

Once you have determined how much you can spend on a mortgage, you will need to talk with a lender about getting pre-approved for a mortgage. When you are ready to look for a loan, you can work directly with a lender or with a mortgage broker representing many individual lenders. Make sure that you choose a professional who will work with your needs and with whom you are comfortable.

Getting pre-approval for a mortgage before you begin your search for a home is important. Having a pre-approval letter with you when you make an offer on a home makes you a more attractive candidate to the seller and may give you a better chance of getting the property.

Choosing a Mortgage

Once you have been pre-approved for a mortgage, you will need to decide which type of mortgage to get. There are many options for mortgages from fixed rate, adjustable rate, and interest only to many more.

The interest rate is usually the deciding factor when choosing a loan. You will also want to choose a time frame for repayment that suits your needs. You can discuss the different options with your mortgage lender or broker in detail. Once you have a general idea of the type of mortgage that best suits your needs, start making comparisons among the lenders that are available.

Back to
Getting Prepared