Credit affects all major financial decisions that involve someone lending you money/credit. It should be no surprise that your credit score will also affect your mortgage rate. Your credit scores affect the kinds of mortgages you can be approved for, how much you can borrow, the mortgage rates you’ll pay and even how much you’ll pay for private mortgage insurance (PMI). It’s not impossible to buy a home with damaged credit; it’s just much more expensive.
Credit scores are instrumental in applying and being approved for a mortgage. When it comes to FHA financing at least, you will be required to have a credit score of at least 580 in order to be eligible for a loan. The higher your credit score is beyond that, the better the terms will be. With a 580 credit score you also qualify for the low 3.5% down. If your credit score is below 580, you can still qualify for an FHA loan but you will need a 10% down payment. The drawback to a 580 is that your interest rate will not be at the national average, it will most likely be slightly higher. Consult your mortgage lender for more information. (We work with several lenders who work hard to get you the best rate, to be connected to one of them, please click here)
This is why it’s so important to understand your credit score in the months before you apply for a mortgage. If you do have impaired credit history, you’ll want to work to improve your credit scores before you even apply. And if you already have good credit, you’ll want to keep it as high as possible by avoiding taking on other new debt.
We host seminars throughout the year regarding improving credit and have affiliations with credit repair companies.
For more information, feel free to contact us.