Know your credit score when considering buying a home: it affects lenders‘ assessments of ability to make payments and determines designed mortgages rates. An article from Bankrate explains:
“Your credit score is one of the most important factors lenders consider when you apply for a mortgage. Not just to qualify for the loan itself, but for the conditions: Typically, the higher your score, the lower the interest rates and better terms you’ll qualify for.”
Homebuyers must now focus on having great credit scores in light of today’s mortgage rates in order to make buying a home more affordable. According to the Federal Reserve Bank of New York, the U.S. median credit rate for loans is currently at 765, though homebuyers can still purchase a home if their credit ratings are lower. An article from Business Insider explains generally how your FICO score range can make an impact:
“. . . you don’t need a perfect credit score to buy a house. . . . Aiming to get your credit score in the ‘Good’ range (670 to 739) would be a great start towards qualifying for a mortgage. But if you’re wanting to qualify for the lowest rates, try to get your score within the ‘Very Good’ range (740 to 799).”
Trust a lender to get more information on credit score, mortgage rate, and how it can be used to obtain a home loan. As FICO says:
“While many lenders use credit scores like FICO Scores to help them make lending decisions, each lender has its own strategy, including the level of risk it finds acceptable. There is no single “cutoff score” used by all lenders and there are many additional factors that lenders may use to determine your actual interest rates.”
If you’re looking for ways to improve your score, Experian highlights some things you may want to focus on:
- Your Payment History: Late payments can have a negative impact by dropping your score. Focus on making payments on time and paying any existing late charges quickly.
- Your Debt Amount (relative to your credit limits): When it comes to your available credit amount, the less you’re using, the better. Focus on keeping this number as low as possible.
- Credit Applications: If you’re looking to buy, don’t apply for other credit. When you apply for new credit, it could result in a hard inquiry on your credit that drops your score.
A lender can assess your credit score and explain the loan types corresponding to your score when you are ready to begin the homebuying process.
Prioritizing strategies to get a better mortgage rate by improving your credit score could prove beneficial with current affordability challenges. Let’s connect if you would like some advice on how to begin this task.