Aaron Ely
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Once you’ve made the decision to buy a home, it’s time to review your credit standing. If you don’t, you can be sure your lender will when you apply for a mortgage. It’s a good idea to know what you’re working with before you fill out your mortgage application. That way, you have some time to establish, improve or repair your credit standing. Exactly where you stand will help determine whether you are approved for a mortgage and, if so, the interest rate you will be charged.

In today’s world, it’s just about impossible to live without credit. It’s a powerful tool, but as with all tools, credit can be extremely dangerous in the hands of those who do not understand its power and how to use it.

Credit permits you to obtain something now for little or no money out of your pocket and pay for it over a specific period of time. Today, almost everyone uses credit in one form or another. Mortgages, credit cards, personal loans and car loans are all types of credit.

There are two types of credit:

• Open-end credit is extended on an ongoing basis, but usually with a limit on how much you may borrow. It is often referred to as revolving credit. As you repay the balance due, a specified credit limit is then available to you to use in the future. Credit cards, such as Visa and MasterCard, are the most common form of open-end credit.

• Closed-end credit is extended on a one-time, limited basis, such as a car loan or a mortgage. Although you may still have a positive relationship with the lender after paying off the obligation, you still must requalify each and every time you want another loan.

• Aaron Ely is a senior mortgage banker from Ahwatukee. Reach him at (480) 636-6207 or aaroncely@hotmail.com.

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