What Credit Score Is Needed for Best Mortgage Rates?

April 13th, 2012 | Author:

Knowing your credit score is just one of the many important things you have to check first before you purchase a new home. After all, you will be paying your mortgage every single month for several years, so obtaining the best mortgage rates could do your financial health a lot of good.

It goes without saying that the importance of a good FICO score in getting a mortgage is tremendous given that it allows you to qualify for a home loan and avail of the best rates available. Every lender uses its own formula, so there is actually no actual figure that anybody can point to that will qualify for the best mortgage rates.

One thing is certain and that is lower credit score means higher mortgage rate or your application for mortgage will not be approved altogether. Mortgage lenders are even more stringent with their requirements now than they have been in the years prior to the housing crisis that started in 2008.

In fact, FHA loans now have a minimum credit score requirement of 500 considering it does not even have one in the past. Surely, a 500 FICO score is way too low and most banks will actually require higher than minimum credit score like 600 to approve an applicant for FHA financing.

Consumers with higher credit rating may benefit from discounted interest rates or less documentation requirements. One may get approved for a loan with a score of 620, but you usually need at least 720 to avail of the lowest rates and least amount of required documentation. With a score of 720, you not open your door to more opportunities of getting the lowest mortgage rates, but also to more lenders and favorable payment terms.

For applicants whose primary goal to get approved for a more affordable loan, the goal is to have a FICO score along the top 40 to 50 percent range. This means that your score will be “good enough” to avail of the lowest mortgage rates. Often, lenders will not distinguish between people whose score is 720 and those who have 820. Meanwhile, those who have a score of below 620 are considered sub-prime and they receive a sub-prime mortgage rate.

It makes a lot of difference in terms of the amount of interest you pay in the long term if you are not able to obtain the best rates for your housing loan. It is just like throwing away money out of the window.

Newest Answers

Credit Card Advice for New Graduates

June 26th, 2017 | Author:

[I]f you’ve recently graduated or plan to this summer, you may be planning to enter the world of being an adult. You’ll get a job, maybe an apartment and car, and probably open a bank account if you don’t already have one. You may also decide to get a credit card with your new income. […]

Continue Reading »

3 Reasons to Start Out a Marriage with Good Credit

June 23rd, 2017 | Author:

[W]ith summer comes plans for weddings, big beautiful bouquets, a gorgeous wedding dress, garden ceremony and many other unique plans. Of course, each of these items cost money, which can add up to thousands of dollars. What many couples fail to plan for as they dream of their wedding is how to start out marriage […]

Continue Reading »

Why the Employed Struggle to Survive

June 21st, 2017 | Author:

[E]ven those with full-time jobs often end up struggling to pay their bills and protect their credit rating. They live paycheck to paycheck with barely enough left over to last until the next payday. With reports of the economy improving and a low unemployment rate, this may not make sense. One theory is that shifting […]

Continue Reading »

How to Save Money on Vacation This Summer

June 19th, 2017 | Author:
h

[P]eople look forward to summertime partially because they have a vacation planned. It’s a chance to get away and take a break from the stresses of life. Unfortunately for those who live on a tight budget, coming back from vacation may be a dose of reality they would just as soon forget. You can imagine […]

Continue Reading »

Financial Steps to Take Before You Graduate

June 16th, 2017 | Author:
h

[I]f you’re about to graduate college and enter the workforce, you want to start out on the right foot. It’s all too easy to get caught up in the idea of a steady paycheck and make some bad financial decisions. Here are a few things you should do about your finances before you graduate. Think […]

Continue Reading »

How to Sell Stuff to Make Money

June 15th, 2017 | Author:
h

[Y]ou have a bill to pay and you don’t have the money. Or your car broke down and you don’t have the extra funds to pay for the repair. One way to come up with cash when you need it is to sell something you own. However, it’s not always as easy as it sounds. […]

Continue Reading »

Have You Become a Financial Adult?

June 9th, 2017 | Author:
h

[A]s a teenager and even college student, you probably had your parents looking out for you. They helped with expenses even if you had a part-time job. Now that you have entered adulthood with a full-time job, you feel like a grownup. But have you grown up financially? You Know How to Budget A person […]

Continue Reading »