Evaluate your credit score and finances
First, it's helpful to check your credit score and make sure your finances meet the requirements for buying a house.
Before you start searching for a house, it can help to save as much money as you can. This can help you get preapproved and put together a competitive offer. However, here's the good news:
You don't need to have enough money in the bank to buy a home outright.
In 2024, 74% of homebuyers financed their homes with mortgage loan. So, the question you want to ask yourself is, "Am I able to qualify for a home loan?" Start by checking your credit score.
Most conventional loans require a minimum credit score of 620, but a higher score can improve your chances of getting approved and securing lower interest rates.
If your score is lower than 620, you still have options.
There are a number of options for home loans with low credit. Steps like making payments on time and reducing debt can improve your credit score.
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If you don’t have enough saved, you can find the money for your down payment by setting a budget to build savings, finding a second source of income or searching for down payment assistance programs.
At this stage, it’s also helpful to set aside money for closing costs. These are additional fees that you need to pay before you get the keys to your new house. We'll go into more detail on that in the closing step.
Closing costs vary depending on your state and lender, but it’s a good idea to budget 3% to 4% of your maximum home purchase price for those fees.
The Fair Credit Reporting Act (FCRA)
Mortgage First Direct Does Not Sell or Share Personal Information
The Fair Credit Reporting Act (FCRA) is designed to help ensure that CRAs furnish correct and complete information to businesses to use when evaluating your application.​
Your rights under the Fair Credit Reporting Act:
You have the right to receive a copy of your credit report. The copy of your report must contain all of the information in your file at the time of your request. You have the right to know the name of anyone who received your credit report in the last year for most purposes or in the last two years for employment purposes. Any company that denies your application must supply the name and address of the CRA they contacted, provided the denial was based on information given by the CRA. You have the right to a free copy of your credit report when your application is denied because of information supplied by the CRA. Your request must be made within 60 days of receiving your denial notice. If you contest the completeness or accuracy of information in your report, you should file a dispute with the CRA and with the company that furnished the information to the CRA. Both the CRA and the furnisher of information are legally obligated to reinvestigate your dispute. You have a right to add a summary explanation to your credit report if your dispute is not resolved to your satisfaction.
What can I do to improve my score
Credit scoring models are complex and often vary among creditors and for different types of credit. If one factor changes, your score may change -- but improvement generally depends on how that factor relates to other factors considered by the model. Only the creditor can explain what might improve your score under the particular model used to evaluate your credit application.
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Nevertheless, scoring models generally evaluate the following types of information in your credit report:
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Scoring models may be based on more than just information in your credit report. For example, the model may consider information from your credit application as well: your job or occupation, length of employment, or whether you own a home.
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To improve your credit score under most models, concentrate on paying your bills on time, paying down outstanding balances, and not taking on new debt. It's likely to take some time to improve your score significantly.
What happens if you are denied credit or don't get the terms you want
Improving Credit Scores
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Analyze an applicant’s credit data & identify opportunities to improve scores with various products. These tools may even be used when prequalifying an applicant, too!
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Mortgage First Direct guidance helps applicants maximize their credit score. It’s that simple.
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Custom plan of action for applicants to reach a target score. Improve scores by 27 points.
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Predictive scenarios for the applicant to develop plans & make decisions.
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Rescore processes may help borrowers qualify for a loan or achieve a better rate when credit information from the three national repositories is updated with help from our Team.
If you are denied credit, the Equal Credit Opportunity Act requires that the creditor give you a notice that tells you the specific reasons your application was rejected or the fact that you have the right to learn the reasons if you ask within 60 days. Indefinite and vague reasons for denial are illegal, so ask the creditor to be specific. Acceptable reasons include: "Your income was low" or "You haven't been employed long enough." Unacceptable reasons include: "You didn't meet our minimum standards" or "You didn't receive enough points on our credit scoring system." If a creditor says you were denied credit because you are too near your credit limits on your charge cards or you have too many credit card accounts, you may want to reapply after paying down your balances or closing some accounts. Credit scoring systems consider updated information and change over time. ​
Sometimes you can be denied credit because of information from a credit report. If so, the Fair Credit Reporting Act requires the creditor to give you the name, address and phone number of the credit reporting agency that supplied the information. You should contact that agency to find out what your report said. This information is free if you request it within 60 days of being turned down for credit. The credit reporting agency can tell you what's in your report, but only the creditor can tell you why your application was denied.
f you've been denied credit, or didn't get the rate or credit terms you want, ask the creditor if a credit scoring system was used. If so, ask what characteristics or factors were used in that system, and the best ways to improve your application. If you get credit, ask the creditor whether you are getting the best rate and terms available and, if not, why. If you are not offered the best rate available because of inaccuracies in your credit report, be sure to dispute the inaccurate information.