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

3 Ways Your Credit Affects Your Ability to Land a Job

October 1st, 2014 | Author:
h

ore employers are asking for permission to access your credit report. They use it to analyze you as a fit for the job they are offering. What you may not realize is how they are using the information to determine if they will approve or reject your application. 1. Employers Look at Negative Credit If […]

Continue Reading »

3 Myths You May Believe about Credit Scores and Why They Aren’t True

September 30th, 2014 | Author:
h

f you have been trying to learn about your credit and how to improve your credit score, you may have read a lot of information. Some of it may seem contradictory. If you are checking out boards and forums, the issue may be even worse. Here are some common beliefs about credit scores and the […]

Continue Reading »

What to Do If Your Credit Card Limit is Lowered

September 29th, 2014 | Author:
h

redit card companies can make all kinds of changes to your credit card account. While you may expect to have your credit line raised over time with a good payment history, you may be surprised to find out that the company lowers it instead. Why does this happen and what can you do? Credit Utilization […]

Continue Reading »

Time for a Money Review

September 26th, 2014 | Author:
h

ow that summer is over and vacations are done, it is time to check your finances. If you have been diligent in your budget, this should be a simple task. However, if you have overspent, it can help you get back on track before your credit suffers. Review Your Budget Make sure that your budget […]

Continue Reading »

Life Lessons Parents Can Teach Their College Kids about Credit

September 25th, 2014 | Author:
h

ome lessons you just don’t learn in a classroom. If you are one of those parents that just dropped off their kid to the first day of college, know that you still have influence on the decisions your child makes. Take the time to teach them these important lessons on credit that they won’t learn […]

Continue Reading »

How to Protect Your Credit Score Now That You’re Back in College

September 24th, 2014 | Author:
h

ou’ve enjoyed a fun, relaxing summer with no late-night studying or reports to write. Or maybe you spent the summer working so you would have extra spending money during the school year. Now that summer is over and you are back in class, you need to remember a few things to protect your credit. Don’t […]

Continue Reading »

How to Create a Plan to Get Out of Debt

September 23rd, 2014 | Author:
h

f you have a large amount of debt, it can be overwhelming to think about. Where do you start? How long will it take? If you have a large goal like purchasing a home, you may think it can never happen. However, if you create a plan for getting out of debt, you will find […]

Continue Reading »