Sounds like a strange question, right? How Does Kim Kardashian So Easily Buy a House She Loves?
Well…given the fact that Kim Kardashian has more money than the Pope, my guess would be that she calls up her realtor, and makes an offer on the property. If she even bothers to make an offer. That person starts the negotiation process with the buyer and their agent.
The rest is fairly simple.
Life tends to be that way when you have more money than you know what to do with.
But you’re not Kim Kardashian.
“How Does Kim Kardashian Easily Buy a House She Loves?” isn’t something that’s at the forefront of your mind when you think about buying a house.
Your primary thought is, “Will I be able to buy a house with my credit?” Or “Can I afford to buy the house that I want?”
Because you don’t have Kim Kardashian’s credit rating.
Kim Kardashian doesn’t have to think about her credit situation.
But you do. And your credit ‘situation’ isn’t great.
So, let’s put Kim on the back burner for a second, and deal with how you’re going to buy a house based on your own credit.
Statistics show that even given the current climate, the number of Americans applying for mortgages doesn’t seem to have slowed down.
If you’re planning to apply for a mortgage, and your credit is less than ‘good’, you’re going to have issues.
So let’s go over what you can do, to make sure that you qualify to buy the home of your dreams, the first time.
Your credit score is THE MOST important deciding factors for whether or not you can get a mortgage.
The reality is that the average U.S. household has over $15,000 in credit card debt. You’re not alone if you’re wondering how to get a loan with bad credit.
For a smooth home buying experience, you should take care of any financial hiccups on your credit report now.
Understand what exactly a credit score is.
The first step in how to get a mortgage when your credit’s not great, is to check your credit score.
A credit score is a three-digit number that represents your level of risk as a borrower.
It’s common for lenders to check your credit score. It is calculated based on the information that shows on your credit report.
Five factors affect your score, in varying degrees of importance:
- payment history (35%)
- debt-to-credit utilization (30%)
- length of credit history (15%)
- credit mix (10%)
- new credit (10%)
Here’s what all that “blah blah blah” means:
- Payment history.
This shows whether or not you typically make payments on time. One late payment can critically affect your score.
One 30-day late payment can cause as much as a 90- to 110-point drop on a score of 780. Even for someone who has never missed a payment before!
- Debt-to-credit utilization ratio.
This is how much debt you’ve racked up on your credit cards divided by the credit limit on the sum of your accounts.
Credit experts recommend keeping this ratio at around 30%. If you’re maxing out your credit cards each month, you could be damaging your credit score in the process.
- Length of credit history.
Having a longer credit history raises your score.
Credit agencies get an average from the age of your oldest account, and the age of your newest account. So you should keep all of your accounts open, even those with zero balances.
- Credit mix.
It helps your score if you have a combination of different types of credit accounts, including credit cards, retail accounts, installment loans, car loans, and mortgage loans.
- New credit.
Each time you apply for a new credit account, you trigger a “hard inquiry” on your credit, which dings your score (typically by five points).
So avoid opening multiple credit accounts at the same time. Doing this will lower the average age of your credit accounts, and hurt the length of your credit history.
Here’s a Tip:
Your credit report doesn’t contain your actual credit score. But, your credit card company can very likely provide your score to you for free, or you can contact a nonprofit credit counselor to find out your score.
Learn what an ideal credit score is.
Kim’s credit score is probably perfect. If you’re going to be asking your bank to lend you money, yours should be too.
A perfect credit score is 850, but only about 0.5% of consumers reach that number, according to the Fair Isaac Corporation.
Once your credit score is over 740, you’re in the best range for mortgages and should be able to qualify for the best interest rates.
If your score is in the 700s, you should still be able to qualify for a great interest rate. For conventional loans, most lenders look for a credit score of at least 620.
Ideally, at a minimum, you should have at least a 660 credit score to land a decent interest rate and avoid jumping through additional hoops to qualify for a loan.
Establish a Credit History.
One of the ways How Does Kim Kardashian Easily Buy a House She Loves, is that she’s very likely established a decent credit history.
The key to how to get a mortgage with your less than stellar credit lies in boosting your credit score.
The length of your credit history plays a big role in your credit score.
If you haven’t been building credit since you were 20, or your parents didn’t add you as an authorized user to their credit card, there are still other ways to qualify for a mortgage and start to establish credibility.
If you have a good track record of paying rent on time, that will help. Those habits usually show that you’re a responsible credit user.
You can also take out a credit-building loan, which is specifically designed to help you build a credit history.
Know what your options are.
Some types of mortgages are designed to help people with lower credit scores buy a home.
For example, Federal Housing Administration (FHA) loans have some of the lowest credit-score requirements at 580 with a 3.5% down payment.
Boost your credit score before buying a home.
To get your three-digit number up to snuff, start by addressing the financial habits that damaged your score in the first place.
- Pay all of your bills on time each month.
This is the easiest way to boost your score. If you need help adjusting your spending habits and designing a budget that makes sense for you, consider meeting with a financial planner (you can find one at NAPFA.org).
- Pay down your credit card debt.
Since credit scores are often the result of having a high debt-to-credit utilization ratio, one of the best ways to improve your score is to get rid of existing debt.
Many experts use the 30% rule of thumb: Charges to your credit cards shouldn’t exceed one-third of your total available credit limit.
You may also be able to raise your score by requesting a credit line increase from your credit card issuer; this would effectively reduce your debt-to-credit utilization ratio. It typically involves just making a phone call or submitting a request online.
Correct errors on your credit report.
How Does Kim Kardashian Easily Buy a House She Loves, is to make sure that there are no errors on her credit reports. Even for her, an error on her report could pose a problem.
You should review your credit reports for errors.
You’re entitled to a free copy of your credit report every 12 months from each of the three major credit-reporting agencies.
One in four Americans have spotted errors on their reports, according to the Federal Trade Commission. The mistake may be something as simple as someone else sharing the same name as you and your bank mixing up your accounts.
If you spot an error, alert the company that issued the credit account immediately. Once the creditor confirms the error, the company will submit a letter to Equifax, TransUnion, and Experian to get the error removed.
If the error is just on one bureau’s report (like a misspelled last name), contact that agency specifically to fix the problem.
Hopefully, you spotted it early in the home-buying process, since it can take time to get errors removed from your report.
If you’re already in the process of purchasing a home, ask your loan officer to help you speed up the error removal.
Remove negative marks from your report.
Kim probably doesn’t have these, but they’re going to be something that you’ll have to deal with.
If you’re the one responsible for blemishes on your report, contact your creditor and ask for a deletion. This probably won’t work for the habitual late payer, but it might be allowed if you’re a one-time offender. It also helps if you’ve been a loyal customer.
If the creditor agrees to the deletion, they’ll send letters to the credit bureaus (the same way they do for errors) requesting that the negative information is removed from your report.
It’s on you to gather documents proving that changes that have been made, like a new credit card statement or letter of deletion. Then have your mortgage lender request an updated score from the credit bureaus.
This process is often referred to as a “rapid rescore,” and can lead to an updated credit score in days instead of months. This can make a massive difference when you’re trying to buy a home in a competitive market.
Decide if a credit-counseling agency can help.
You need to understand the difference between a credit-counseling agency and a debt-management company.
If you’ve fallen behind on your credit card payments, a credit counselor can help you create a plan to repay your creditors, and better manage your money for a relatively low fee.
A debt-management company will negotiate with your creditors to try to reduce the amount of debt you owe. But many debt-management companies charge a huge fee for their services.
For most people, a debt-management company probably isn’t the way to go.
Whether or not you should meet with a credit counselor, depends on how complicated your financial situation is.
If you have debt on only one credit card and just have to pay off the balance, you already know what you have to do to fix your credit score.
If your situation is more complicated, a session with a credit counselor might help you come up with a payoff plan.
Some nonprofits, like the Consumer Credit Counseling Service, offer free consultations.