Published: April 05, 2008 08:46 pm            

Pay up! Don’t let debt keep you down

Credit score important when buying a home

After searching for months, you have finally found your dream home. Everything is perfect right down to the landscaping, but there is just one problem. Your credit score is a little less than perfect — less than 620 to be exact.

Home buyers should have a credit score of at least this amount before they even think about buying a home, said Becky Chenault, loan officer with Eagle Mortgage of Kentucky in Richmond.

“So many people don’t know their credit scores,” she said. “I suggest that everyone get their free credit report each year.”

However, when it comes to checking credit scores, try not to get carried away.

“Every time your credit is pulled, it brings your credit score down,” Chenault said.

A person can check their credit by more than one company without losing points, but it must be done during a consecutive 30-day period, she said.

Free credit report can be obtained through Trans Union at transunion.com, Experian at experian.com or Equifax at equifax.com. A person is allowed one free credit report each year from each company.

Keeping an eye on credit scores is not the only thing considered by lenders when issuing a loan. Keeping good credit is important, but so is keeping a stash of cash.

“Be sure to save money because most lenders are requiring 20 percent down,” she said. “Most people don’t have cash.”

The number of financial liabilities one has is a significant factor lenders consider when issuing loans.

“If you’re planning to buy a new home, don’t go out and buy a new car,” Chenault said. “Make sure you aren’t piled up with credit card debt. So many people don’t realize that when they go out here and borrow money. If they don’t make their monthly payments on time, that will affect whether or not they get a loan.”

As falling home prices and interest rates, it obviously is the best time to purchase, but it may not be that easy for some, she said.

“Now, it’s a little tougher market,” she said. “It’s a good time to buy, but there are tougher rules to purchase. It’s really gotten tough on first-time home buyers. It’s a hard market for people trying to get on their feet.”

There is help for first-time home buyers who meet certain criteria of the KHC.

“We have a down payment assistance program that comes with a lower interest rate,” said Allison Craigmyle of the Kentucky Housing Corp. “You have to stay in the home five years.”

Under this particular assistance program, the home buyer must fit income qualifications. For those who do not qualify, there are other programs available.

“We have regular down payment assistance plans,” she said.

Kentucky Housing Corp. customers are given a 30-year, fixed-rate mortgage. Visit www.kyhousing.org or call 1-800-633-8896 for more information about what the KHC has to offer.

A fixed-rate mortgage payment calculator can be utilized at www.first-time-home-buyer-solutions.com. Home buyers must include the loan amount with interest rate, loan costs and the time period of the loan, property value, monthly real estate taxes, monthly hazard insurance and monthly mortgage insurance.

A recent surge in foreclosures has become a concern for legislators in Frankfort.

Rep. Tommy Thompson D-Owensboro, is a home building and also the sponsor of House Bill 552 that was passed earlier this week.

“(The bill) puts restraints on the mortgage industry,” Chenault said. “So many mortgage companies were popping up all over the state.”

The bill puts more pressure on mortgage lenders who will be responsible for doing a thorough financial background check before lending money to customers. Another inclusion in the bill is the creation of the Kentucky Homeownership Protection Center, where counseling and information is distributed to new home buyers at closing.

The U.S. Department of Housing and Development offers to first-time home buyers “Nine steps to buying a home.” Steps include: figure out how much you can afford; know your rights; shop around for a loan; learn about home buying programs; shop for a home; make an offer; get a home inspection; shop for homeowners insurance and sign papers.”

Details about each step can be found at www.hud.gov/buying/index.cfm or by calling 1-800-FED-INFO (333-4636).

Ronica Shannon can be reached at rshannon@richmondregister.com or 623-1669, Ext. 234.

        

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