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.
[I]f you have a massive amount of credit card debt that you cannot seem to pay off, you are not at the end of the line. You do have a few options, but you must choose the best one based on your situation. Consolidate Debt If you haven’t ruined your credit rating because of non-payment, […]
A credit card comes with many benefits. It allows you to pay faster and easier and is accepted almost everywhere. It often comes with rewards, and it can help you build or rebuild your credit score. However, people make several mistakes when selecting a credit card that can hurt their finances and credit for the […]
[A]nyone trying to repair their credit knows how bad collection accounts are. They can do a lot of damage to a person’s credit score, and it can take a long time to recover. There has been a lot of information and conversation going around about whether to pay old collections or leave them alone, whether […]
[A]t least it doesn’t have to if you learn from previous behavior. Rather it was the result of poor choices or an unfortunate event, you don’t have to pay for credit mistakes for the rest of your life. A study from VantageScore Solutions shows that credit scores can improve over time. How long? Surprisingly, it […]
[T]he ultimate threat for many is that they will have to declare bankruptcy because there is no way out of debt. They avoid this option except as a last resort because of the long-term impact it has on them. However, many people really don’t know what a bankruptcy would do to their credit rating, except […]
[L]easing a car is becoming more popular for people who like to trade for the latest model often. They also appreciate the lower payments and no worries about getting financed if you owe more on your car than it’s worth. Purchasing an automobile through a car loan can be difficult if you have poor credit. […]
[I]f you have an unusual name, you are probably used to spelling it for other people. Even seemingly simple names like Ann (Anne) or John (Jon) can have multiple spellings. While this may not seem like a big deal if you’ve had to deal with it all your life, it can cause major headaches, especially […]