You’ve scrimped and you’ve saved and you are finally ready to purchase your very own home. However, you’re slightly worried about your credit rate. You’ve been working hard on bringing it up the past few years, but will it be enough? The answer could be… yes! Lately creditors are considering lower credit rates when lending, with some specific additional requirements from the buyer. However, it is always important to understand the ways in which your credit score effects your mortgage rate so that you can make the best choice for you and your finances when it is finally time to buy.
Qualifying With a Low Score:
A credit score is one of the most important factors that lenders consider before approving home loans. More and more, individuals or couples with low credit scores are qualifying with these creditors. According to www.fha.com, some can even qualify with a FICA Score as low as 580, but are required to pay a 10% down payment.
Luckily, lenders look at additional factors as well when approving loans. Proof of steady payment of utilities and rent for a full year can increase changes of loan approval. Additionally, companies like FHA, consider factors such as recession effects and job loss when reviewing lower credit scores from applicants.
SEE ALSO: Can I Buy A Home With No Down Payment?
How Credit Affects Mortgage Rates:
The higher the credit score, the lower your mortgage rate will be. The lower the credit score, the higher your interest rate will be. Interest rates variations such as one percent may seem trivial, but can dramatically affect your monthly payment. These small amounts will add up substantially over the length of your loan term.
Improving Your Credit Rates:
Always check your credit rates at least a year in advance from the time you wish to buy. Furthermore, www.bankrate.com recommends viewing your rates through reputable sites, such as Equifax, Experian and TransUnion. Thoroughly check each report to make sure all personal and credit information is accurate and then work diligently to increase your rate over the next year.
Creditors are looking for buyers with good scores, steady payments, a level of savings, and a combination of credit payments such as a student loans and few credit card uses.
With a little bit of saving and hard work you can qualify for the loan you need, or increase your credit score enough to get you the mortgage rate that you really want. So if your credit score is lower than you’d like, when it comes to buying a home, all hope is not lost. You may be able to get what you need to make your dream home a reality.