As a physician, you know that buying a home is a major decision, and it’s important to have a good credit score when going through the process.
There are many factors involved in monitoring your credit score during this time so you can be sure you are making smart decisions. With some knowledge and preparation, protecting your credit and maintaining an excellent score for homebuying is possible!
Read on to find out how best to monitor and protect your score as you navigate the homebuying process.
Understanding Your Credit Score and Why it Matters When Buying a Home
When you’re in the market to buy a home, your credit score can have a significant impact on your ability to get approved for a mortgage loan and secure a favorable interest rate. Your score reflects your creditworthiness and is calculated based on many factors such as your payment history, credit utilization, length of credit history, and credit mix.
A higher score will typically result in a lower interest rate on your mortgage, which can save you thousands of dollars over the life of your loan. On the other hand, a lower score could lead to higher interest rates or even disqualification from getting a mortgage altogether.
If you’re a physician looking to purchase a home, you may be eligible for a physician loan, which offers unique benefits such as low or no down payment and no private mortgage insurance. However, even with these advantages, it’s essential to maintain a healthy credit score to secure the best terms and rates.
Steps to take to protect your score during the homebuying process
- Check your credit report on a regular basis. Review your credit report for errors or inaccuracies that could negatively impact your credit. Even minor errors, like a misspelled name or incorrect address can negatively impact your score. If you find any errors, dispute them with the credit bureau reporting them. URL: https://consumer.ftc.gov/articles/disputing-errors-your-credit-reports)
- Avoid opening new lines of credit. Each time you apply for credit, a hard inquiry is placed on your credit report, which can lower your score. Make sure to hold off on any new credit until after you’ve closed on your home. For example, don’t open a new credit card account, finance appliance purchases, etc., during this time.
- Keep your credit utilization low. Your credit utilization, or the amount of credit you’re using compared to your credit limit, is an essential factor in your score. Aim to keep your credit utilization below 30%. You can check your credit limit with each individual line of credit you have through your provider institution, usually through an app or online management portal. Your statement will also typically include your credit limit.
- Pay your bills on time. Late payments can significantly damage your score, so it’s crucial to make all of your payments on time, including credit cards, loans, and other bills. You can ensure you pay bills on time by taking steps like setting up monthly auto-payments whenever possible.
Tips to boost your score before applying for a mortgage
- Pay down debt. Reducing your debt can lower your credit utilization and improve your credit score. Focus on paying off your highest-interest debt first, such as credit card balances.
- Keep old accounts open. The length of your credit history is a factor in your score. Closing old accounts can shorten your credit history and lower your score. We recommend keeping old accounts open, even if you’re not using them.
- Avoid closing any credit accounts that have a balance. If you must close an account, make sure that you pay off any remaining balance on your account beforehand. Closing an account that still has a balance on it can increase your credit utilization ratio, which can negatively impact your score.
*Homebuying tip:
Considering a physician loan. During your homebuying process, you may want to consider looking into Physician Bank’s Physician loans, which are specialized mortgage programs designed for medical professionals. Physician Bank’s Physician Loan was designed with leniency toward student loan debt during decisioning. These loans typically also have lower down payment options and other benefits than standard mortgage offerings.
Your credit score plays a critical role in the homebuying process. A good score can help you qualify for a mortgage with better terms, while a poor score can make it difficult to get approved for a loan or result in higher interest rates.
Remember, you’ll want to protect your credit score leading up to and during the homebuying process. If you monitor and protect your score, you can secure your financial future as a new homeowner
Are you a physician in need of a loan? Physician Bank was made for you!
Start a conversation with us today.
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