Buying a home is usually the largest purchase an American taxpayer will ever make, but it can also be one of the most confusing. As any one who has ever owner property can attest, there are many decisions to be made and what seems like hundreds of documents that must be signed. To help potential homebuyers rushing to purchase a house before the federal tax credit deadline, CNN Money has composed a helpful article explaining the 6 biggest mistakes to avoid.
1. Not knowing your credit score
If you're even toying with the idea of buying a home, you must know your exact FICO score. If you find it is less than ideal, wage a systematic campaign to raise it. Too many borrowers ignore this step and get surprised when they get interest rate quotes.
Once you've pored over your credit history and corrected any errors, your next step is to pay down revolving debt balances to no more than 30% usage. That will help raise your score significantly.
Why does it matter?
The lower your score, the higher your costs of borrowing. Fannie Mae and Freddie Mac, for example, charge higher up-front fees to borrowers with credit scores below 740.
For a buyer with a credit score between 680 and 700, the fee comes to 1.5% of the mortgage principal. On a $200,000 mortgage, that adds up to $3,000. Someone with a 740 score pays nothing.