Experts say good credit crucial in buying a house
Getting and keeping good credit can go a long way toward achieving the American dream 鈥� owning a home.
There蘑菇视频 a good reason why many people dream of owning a home. Homeownership offers benefits such as stable monthly payments and the opportunity to establish a sense of community.
It can also be a way to build equity in the home over time.
However, experts say it蘑菇视频 crucial to become financially literate before launching into a home purchase.
For example, Dianne Zinn, an associate broker, past president and director of Fayette County Multiple Listing Service (MLS), recently reported housing sales in 2012 surpassed annual sales in the past decade. But she offered this caveat:
鈥淚t just seems many of the buyers are a bit shy about buying and many are not educated enough to protect their credit and to establish good credit when it comes to home buying.
鈥淲e have noticed that many of the younger buyers have no idea what it means to have credit, get credit and keep good credit,鈥� Zinn said.
Scorched by the housing bubble burst, banks also are being more cautious in approving mortgages, Zinn noted..
鈥淭he banks now are making everyone walk the long and narrow road unlike it was back in 2005 when the banks were in essence making the home buy much too easy, thus with many of those buyers going into the foreclosure mode after only owning the home for several years,鈥� added Zinn.
In essence, 鈥淓ducated borrowers are better prepared for successful, long-term homeownership and overall financial stability,鈥� said Christina Diaz-Malone, vice president of Housing and Community Outreach at Freddie Mac.
She said a recent study found that financial counseling before purchasing a home can reduce the likelihood of going into default. For first time homebuyers, counseling reduces the likelihood by an average of 29 percent.
Fortunately, she added, there are a number of free credit education resources available.
For example, Freddie Mac蘑菇视频 CreditSmart program, a comprehensive, multilingual curriculum used by lenders, churches, schools and non-profit organizations, has helped more than 3 million consumers across the country make more informed financial decisions.
The program today is offered in two ways: CreditSmart蘑菇视频 new, self-paced web version features 12 education modules. Consumers can take the free online course at www.FreddieMac.com/creditsmart.
The second way is to attend a class led by a housing counselor certified by the US Department of Housing and Urban Development.
Taking a credit education course can prepare a consumer by covering different topics. These include:
n Savings: When purchasing a home, a down payment will be necessary. The consumer should have between 5 and 20 percent of the home price, as well as money for fees, closing costs, moving and other expenses. Credit education can teach the consumer how to save that money.
n Language: Being well-versed in the mortgage and real estate language will help consumers travel channels toward buying a home. Such terms as fixed-rate mortgage, variable-rate mortgage and loan-to-value ratio will help the consumer to understand what he or she is signing.
n Budgets: Anyone with financial goals must have a spending plan. Credit education can help a consumer decide between spending needs and wants. Setting up a realistic budget and sticking to the plan defines those differences.
n Credit: Usually, the better the credit rating the lower the interest rate a consumer will have to pay when obtaining a mortgage loan. It蘑菇视频 vital to establish good credit before seeking the loan.
Another benefit of credit education is helping the consumer recognize possible fraud.
There are many companies and individuals who may not have the borrower蘑菇视频 best interest in mind. By using resources at Freddie Mac, these pitfalls can be avoided.
There also are local organizations, such as the Fayette Board of Realtors, family members who have already gone through the home buying process or friends to rely upon.
For more information, go online to www.FreddieMac.com/homeownership/educational/ or call the Fayette Board of realtors at 724-437-1740.
James Pletcher Jr. writes a weekly real-estate story for the 蘑菇视频 from a variety of angles. If you have an interesting story about buying or selling a home in Fayette County and would like a story written about it, please contact 蘑菇视频 Executive Editor Mark O鈥橩eefe at 724-439-7569.