How Credit Scores Affect Mortgage Rates

How Credit Scores Affect Mortgage Rates

Obtaining a low mortgage interest rate can help you save money on the price of your home. While many people try to compare lenders to secure the best possible rate, one of the main determinants of a mortgage rate is your credit score. Borrowers with higher scores are more likely to receive a lower rate than those with lower credit scores. Most lenders view a potential home buyer with a high credit score as more dependable and less likely to default on mortgage payments.

What is considered a “high” score?

The highest score a person can have is 850. However, it’s unusual for someone to have a perfect credit score. Most home buyers should aim for a score of 720 and above to qualify for good mortgage rate. If your credit score goes below 620 it can be difficult, though possible, to get a mortgage as well as a favorable rate. For an approximate breakdown, here is a range of how credit scores are judged:

Excellent = 720 and above
Good = 660 –719
Fair = 620 – 659
Poor = 619 and below

Can I still obtain a loan with a low credit score?

If you know your credit score isn’t stellar, it doesn’t necessarily mean you cannot qualify for a mortgage. For example, an FHA loan is a popular loan type among first-time homebuyers which accepts less than excellent credit scores. When you begin the mortgage process, your Loan Officer will order a credit report and you can start to explore your options in more detail.

Finding your credit score

A credit report can come from three different reporting bureaus: Equifax, Experian, and TransUnion. These reports require some background information and security questions, then deliver an outline of your credit history. However, if you’re interested in simply retrieving the number, you can easily view your FICO credit score, through your credit card company or online. It’s important check your credit score in order to determine whether you should improve it before applying for a loan. Speak with your Loan Officer about when you’re looking to buy and what you can do to in the meantime to increase your credit score.

Related Posts

What Are Construction and Renovation Loans?
What Are Construction and Renovation Loans?

When most people think about mortgage loans, they think of the standard, long-term financial commitment to purchase a home. But did you know there are mortgages available specifically for building or renovating a home too? Keep reading to learn exactly how you can benefit from a construction or renovation loan. Construction Loans Construction loans are […]

September 08, 2021
Full Post
Using a Mortgage Calculator to Understand Your Home Loan Options
Using a Mortgage Calculator to Understand Your Home Loan Options

When considering buying a home or refinancing your current mortgage, it can be hard to know where to start and how to tell what the right decision is. While talking to a mortgage lender is always going to be your best bet for truly figuring out how much your home loan may be or if […]

September 01, 2021
Full Post
5 Common Home Buying Mistakes
5 Common Home Buying Mistakes

Whether you’re a first-time home buyer or seasoned house hunter, there are some commonly made mistakes you should know to avoid. Not Determining How Much House You Can Afford You should know how much your budget is before you start looking for houses. This will help you avoid wasting time looking at homes outside your […]

August 11, 2021
Full Post

Connect With Us