Improving your credit might be one of the smartest steps you can take as a home seller.
- If you sell a house, you may need a mortgage to buy another.
- The higher your credit score, the more likely you are to get mortgage approval and get an affordable mortgage rate.
You may have heard that we are currently in a seller’s market, and that is an accurate statement. Home values have skyrocketed nationwide, and if you’re selling your home today, you might command a higher price than usual. Moreover, housing stock is still low and mortgage rates are still competitive. This means buyers can claim homes and you could get a quick deal if you put yours up for sale.
If you’re considering selling your home, there’s a checklist of things you’ll need to cover first. These elements include finding the right real estate agent to team up with and making minor home repairs to avoid turning off potential buyers. But there’s another key decision to make if you’re selling your home: increasing your credit score.
Why a higher credit score is essential when selling your home
Once you sell your house, you will need another place to live. If you sell and downsize, you may have enough money from the sale of your home to avoid having to take out another mortgage.
But if you buy a similar or larger home after the sale, you’ll likely need to borrow money to finance it. And the higher your credit score at the time of your mortgage application, the more likely you will be approved. Plus, a higher credit score could be your ticket to a lower mortgage rate when applying for a home loan.
How to quickly raise your credit score
If your credit score needs work, there are several ways to improve it in a relatively short period of time. First, check your credit report for errors. If there’s a mistake playing against you, like an overdue debt that was never yours to begin with, then getting it fixed could give your score a nice boost.
Then try to pay off some of your existing credit card debt. This will lower your credit utilization ratio, which is a key factor in calculating your credit score.
You can also try to be added as an authorized user on a long-standing credit card. This could help offset a shorter credit history, which could also negatively impact your score.
What credit rating do you need to get a mortgage?
The good news is that you can get approved for a conventional mortgage with a credit score as low as 620. But while that may be the minimum score required for a conventional home loan, some lenders may impose higher standards.
Also, while you can get a mortgage with a 620 credit score, you might not get a good interest rate on your home loan with that number. It pays to do what you can to increase your score. In fact, if you really want to get the best rates available, you’ll usually need to get your score between 700 and 700.
If you’re preparing to sell your home and your credit score isn’t great, you might want to hold off and give yourself some time to improve it. Houses are selling fast these days. The last thing you want is to find yourself stuck in a situation where you have a buyer but can’t buy a replacement home because you won’t qualify for a new mortgage.
A Historic Opportunity to Save Potentially Thousands of Dollars on Your Mortgage
Chances are interest rates won’t stay at multi-decade lows much longer. That’s why it’s crucial to act today, whether you want to refinance and lower your mortgage payments or are ready to pull the trigger on buying a new home.
Ascent’s in-house mortgage expert recommends this company find a low rate – and in fact, he’s used them himself to refi (twice!). Click here to learn more and see your rate. While this does not influence our product opinions, we do receive compensation from partners whose offers appear here. We are by your side, always. See The Ascent’s full announcer disclosure here.