Your credit score is probably THE most important factor in determining how much you will be allowed to borrow – not just on your home, but on other big-ticket items, such as vehicles, or lines or credit. So, if you are in the market for a new home, lets go over some of the facts.

Mortgage companies use your FICO score (a numeric value that ranks your credit-worthiness), as an easy way for them to determine their level of risk when granting you a mortgage. This number, along with the supporting information, tells them what debt you currently have (loans, credit cards, etc), whether you normally pay your bills on time, as well as whether you have had any bankruptcies or collections recently. Credit scores rankings are: Excellent (760 -900), Very Good (725-759), Good (660-724) Fair (560-660) and Poor (300-560). Where you fall in these categories will greatly affect the types of loans you will be eligible for.

Our credit scores are typically fluctuating within a given range, but change more significantly if, for example, you apply for a new car loan or credit card. Your personal payment patterns can increase or decrease your credit significantly.

We recommend talking to a mortgage broker, or your bank well in advance of shopping for a home. Monitor your score, and take action to improve your score if recommended, to ensure you have the highest score possible!

To maximize your credit score, you should avoid applying for any new credit cards or consumer loans. There are a number of things you should avoid to ensure your score reflects good habits – especially in the time period leading up to a major purchase!

After you move in, and your mortgage is in place, you can make the decisions and about where to spend. You may even have the option of a home-equity line of credit, which typically results in much lower interest rates than other types of financing.