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.
[D]ealing with a debt collector can be frustrating and even downright scary. Some of them use unscrupulous tactics to attempt to force you into paying a bill. Before you contact a debt collector or talk to them, you should know your rights. A Right to a Written Notice A debt collector is obligated to provide […]
[I]nstallment loans are a type of personal loan with no collateral. You are given a loan which you will pay back with regular payment. They may be set up monthly, bi-weekly or with some other timeframe. Before applying for one, you should understand what they are, how they work and what they can do for […]
[I]f you’re like many people with bad credit or past credit problems, you may not qualify for traditional credit such as loans and credit cards. Your negative credit makes it difficult to establish new positive credit because it seems like no one will give you a chance. However, you can use nontraditional credit to help […]
[W]hether you are young and establishing credit for the first time, or trying to open an account after years of using cash only, you should understand the basics about building new credit. 1. It takes time. Even if you are approved for a credit account, it won’t automatically open up a whole new world for […]
[D]o a search on the internet for bad credit home loans, and you’ll see a lot of results pop up. Take some time to browse through those results, and you’ll quickly see that they may talk about mortgages for bad credit, but no one seems to offer them. You may wonder if such a thing […]
[Y]ou know creating a budget and following it can help you save money. But do you know it can also protect your credit score? A budget does three things for your credit. 1. A budget helps you save money for emergencies. When you plan to save money for emergencies, you avoid running up your credit […]
[I]f you struggle to save money and would like to have extra funds for a vacation, a new car and an emergency fund, the answer to all your problems may be multiple savings accounts. Most people think of setting up one savings account, but for some it may be too tempting to access the funds […]