By Becky Frost
If you are a first-time homebuyer, friends and family members may be quick to give advice about the home-purchasing process. As a result, there could be several homebuying myths that may have found refuge in the back of your mind. Unfortunately, that friendly advice can help perpetuate some of the most common homebuying myths -- especially when it comes to credit.
Myth No. 1: You need perfect credit to purchase a home.
Fact: It is true that an individual's credit score has an impact on the mortgage loan approval process and ultimately the resulting interest rate. However, perfect credit is not needed to secure approval for a mortgage loan. While credit scores can range widely, the higher your credit score, the more options you will have to find a mortgage with favorable interest rates.
Myth No. 2: Lenders have free rein in sharing your personal credit information.
Fact: Not so. For a lender to share your information with an affiliate (any entity that is involved in making, holding or investing in bank loans or credit extensions), generally you must first give your permission. State and federal privacy laws are in place to help protect your personal information.
Myth No. 3: Lenders only use one scoring model that determines creditworthiness.
Fact: There are a number of credit-scoring models used to determine credit risk in today's marketplace. For example, many lenders use the VantageScore® as one model for determining credit worthiness. While scoring models vary, many of the same factors influence your credit score, including your payment history and your level of debt.
Get pre-approved: Before you start hunting for a house, determine what you can comfortably afford to pay each month. Even if you are pre-approved for a mortgage, you may want to consider if the mortgage is affordable. Preapproval allows you to determine how much home you can shop for and afford. It may also give you an advantage when it comes time to negotiate your home mortgage. Understanding the factors that are important to a mortgage lender can improve your chances of finding your dream home.
Becky Frost is senior manager of Consumer Education for Experian Consumer Services. Experian Consumer Services offers credit monitoring products like freecreditscore.com™, which has resources and calculators that help you understand how credit can impact your life. Credit is an important component when buying, renting or refinancing your home.
This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.
Note: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinion or position of Zillow or AOL.