There is no way around it; lending practices are getting stricter when it comes to home mortgages. Recently, even the FHA (Federal Housing Administration) announced new stricter guidelines for first time home buyers that should take effect in late spring or early summer. These changes in lending mean Key West homebuyers may have to do a little more planning than in years past. One of the first things you want to do is make sure your credit score is in order.

It wasn’t that long ago a few blemishes on your credit report didn’t affect you very much. That is no longer the case today. Your credit score determines not only your ability to get a loan, but your interest rate as well. So the first step on the road to home ownership is:  find out your credit score!

A free copy of your credit report is available to you once a year. You can go to AnnualCreditReport.com, which is the official site for consumers to access their free annual credit report online. There are numerous other sites you can use as well. These often require enrolling in a free trial period in a credit report protection plan of some sort.

So now that you know your number, let’s talk about what it means. Credit Scores range from 300-850. The higher your score, the better! To give you an idea of where you might stand, let’s look at the average scores needed for most lenders.

 Fannie Mae (Federal National Mortgage Association) recently raised their minimum credit score requirement to 580.. As we discussed in a previous post, FHA just announced their new guidelines. If you have a credit score lower than 580 you will have to come up with a 10% down payment instead of 3.5% for those with a higher score. Lastly, most financial institutions want to see above 700 and for the best interest rates, some lenders are looking for scores of 760 or higher. Just to put that in perspective, three years ago a 630 credit score could have gotten you a mortgage loan with minimal road blocks and a slightly higher interest rate.

Don’t despair if your credit score isn’t where you want it to be. The FHA guidelines have not yet gone into effect! So you still have time to buy a home before these changes impact you. Also, the home buyer tax credit is still available through April 30, 2010. The credit of $8,000 for first time buyers or $6,500 for repeat buyers can also help with your down payment.

If you are not ready to buy right now, that is OK too! It means you have time to improve your score and to save up for your down payment! All the changes taking place can seem a bit intimidating, but don’t let that stop you from pursuing your dream of owning a home! When you are ready to enjoy the island life, call Margarita Villoch! Her team can help you navigate through all the changes and help you find a place to call home in Key West!