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

The Basics of Budgeting

April 24th, 2017 | Author:
h

[W]hether you are just starting out on your own or just starting over, one of the most important things you can do is learn how to budget. Many people think they know how to budget, but they fail to stick with it. So, the goal is to not just create a budget, but to create […]

Continue Reading »

Revolving Credit or Installment Loans: Which is Better for Your Credit?

April 21st, 2017 | Author:
h

[I]f you’ve been learning about credit, one of the first things you’ll hear is you can’t get credit if you don’t have credit. It often seems to be a Catch-22; no one will give you credit so you can’t get established with a credit history so you can get new credit. With diligent effort, you […]

Continue Reading »

What to Do When a Landlord or Employer Asks to See Your Credit Report

April 19th, 2017 | Author:
h

[S]ometimes when you are filling out a rental or job application, you’ll come to a page that asks you to sign and authorize a credit check. Most people will sign it, hoping for the best if they have less than perfect credit. Even when you do sign it, you may wonder if that was the […]

Continue Reading »

Why Do Employers Look at Your Credit Report?

April 17th, 2017 | Author:
h

[I]f you’ve applied for a job, you may have been asked to provide authorization for the potential employer to look at your credit report. While you signed it just to be considered for the job, you may wonder why they need to know about your credit history. What are employers looking at when they review […]

Continue Reading »

Do Creditors Look Past Your Credit Score?

April 16th, 2017 | Author:
h

[Y]ou hear all about the minimum credit score needed to get a credit card or loan. It seems like this one magic number seals your fate. You wonder if creditors or lenders even look at the information in your credit report or if they just use that number to get a decision for your application. […]

Continue Reading »

What Creditors Look at on Credit Reports

April 14th, 2017 | Author:
h

[T]here’s a lot of information on a credit report. If you’ve ever requested a free copy of your credit report, you may have been overwhelmed at all of the stuff on there. It makes you wonder what creditors and lenders really look at. Do they read every line or do they skim? If they skim, […]

Continue Reading »

How a Credit Card Can Help You Build Credit

April 7th, 2017 | Author:
h

[A]fter the recession of 2008, more people have become conscious of debt. Some of them have decided to give up using credit cards or other forms of credit in favor of a cash-only approach. While this is a good idea for people with bad spending habits or those who have a tendency to live beyond […]

Continue Reading »