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.
redit scores are a lot like an unsolved mystery. Everyone has an opinion about how they work, but it seems that nobody knows for sure. Talk to multiple people and you will get conflicting stories. Trust in the wrong information and you can do more harm than good to your credit score. Here are five […]
t is often frustrating to get turned down for a credit card, especially if you had done research and chosen one that you thought would be an easy approval. Sometimes it is a low credit score that is the reason, but other factors may also cause rejection even with a good score. Here are three […]
f you have plans to get married in 2015, congratulations. It is a big step in your life and one that should be filled with excitement and happiness. If you have heard that getting married impacts your credit score, you may wonder what will happen when you say “I do.” Everything and Nothing Changes The […]
ven if you make your payments on time every month, you cannot have a perfect credit score if you max out your credit cards. In fact, your credit may be only average even if you do everything else right. It is because how much you use your available credit has a big impact on your […]
any people make resolutions at the beginning of the year only to find that they are broken by the middle of January. It can get discouraging, especially if your resolution was to improve your credit score. Instead of just focusing on what you should do, you also need to think about what you must stop […]
t’s a new year and you have new goals to get your credit in order. Maybe you want to buy a house or a new car or you just want to stop the collectors from calling you. No matter what your reason is for improving your credit, these apps can help make it easier. 1. […]
ow that the holidays are behind you, the focus may move to paying off your credit cards. They probably took a hit during the busy shopping season and may even be maxed out. If this is the case, you want to make paying them down quickly a top priority. Otherwise, you may find out that […]