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Understanding your credit score and how to qualify for a home loan

August 25, 2021

How to Prepare for Your First Home buyer Loan

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What is a Home-buying Process and What are the Stages?

Purchasing a home is a complex process that may require multiple steps to complete. It usually begins with looking at homes in the area, followed by making an offer on the home, negotiating with the seller on certain terms of the purchase agreement, and concluding the sale by paying for and finalizing the transaction. You can get a head start by getting pre-approved before starting your journey to your dream home.

5 Things About Your Credit Score You Didn’t Know

1) Your credit score is calculated using a complicated algorithm

Your credit score is a three-digit number that ranges from 300-850, with 850 being the best score possible. Your credit score is calculated based on information in your credit report, which includes your:

  • Payment history
  • Length of credit history
  • Types of credit used
  • Number of inquiries on your report
  • The age of your credit accounts

2) There are different types of credit scores

The number of credit scores available can be a little confounding. Different credit reporting agencies may use different methods to calculate your credit score and even different types of scoring models.

A credit score is a number calculated from a credit report that can influence the way lenders to view you. Most people have no idea what their credit scores are or how they are calculated.

3) Your credit score is one number, but it can be broken down into five different factors: Payment history, amount of debt, length of credit history, types of credit in use, and new debt relative to total available credit.

4) Every lender uses its own unique calculations to compute your credit score. Lenders look at how much debt you have in comparison to the number of available loans you have for instance. But the exact math behind your score remains proprietary information.

5) Credit reports usually contain personal information about you and your debts: Your payment history and when you last made payments; the amounts owed. If you are concerned about the privacy of your credit report, review the Fair Credit Reporting Act and know your rights.

When you apply for a loan, the lender will check your credit report. This report is prepared by a credit bureau and will show what debts you have had and how you have paid them. A good credit report can help you get loans with attractive interest rates.

A good credit report can help you save a lot of money. For example, your interest rates for loans and credit cards will be lower. You’ll also find it easier to rent an apartment or buy a house.

The Importance of Saving for a Down Payment

A down payment is the amount of money that you pay upfront in order to purchase something. For example, if you are buying a car, the down payment will be a percentage of how much you are paying for the car.

Oftentimes people don’t save for a down payment and end up spending more than they can afford on their monthly payments. If you are willing to save for an extended period of time, it will help you get rid of debt faster and have more disposable income.

If you are looking for a loan to consolidate your credit card debts, Joola can help! You can join Joola’s co-saving groups and take the first payouts at affordable rates. You can invite friends and family to help you shave the debts faster. The rate is affordable and you can save money on interest and time. Plus, your friends and family can encourage each other to save and earn rewards together.

If you want to learn more about how Joola works, check out our how to get started page.

Should I Hire a Real Estate Agent?

The decision to hire a real estate agent is a personal one. Some people prefer to work with an agent and some are confident enough to sell on their own. If you feel like you don’t have the confidence or skillset for the task, it might be smart to hire someone who does.

A real estate agent offers many benefits, chief among them being experience in the field. They have knowledge of best practices in negotiation, they know how to get your home sold and they know how to negotiate the best terms for you in terms of price and time frame. A real estate agent can also provide referrals for contractors when renovations are needed after the sale is complete.

How to Prepare for Qualifying for Your First Homebuyer Loan

Many lenders will offer loans that are based on a first-time home buyer’s ability to pay back the mortgage, their income, and credit score.

First-time homebuyers may need to have a higher down payment than what is typically required. The most popular loans for first-time buyers require a 3% down payment. But others may require as much as 10% or more.

First-time home buyers should also consider whether they want to go with an FHA loan or conventional loan. A conventional loan may be less expensive upfront than an FHA loan but requires private mortgage insurance, which can raise your monthly payments by hundreds of dollars each month over the life of the loan and cost thousands of dollars in interest over the life of the loan.

Shop around for good rates and see what different financial institutions can offer. Some banks will offer grants for first-time homebuyers that you can take advantage of. Your dream home may be a reality soon!