Buying A Home with A Mortgage: What You Should Know About Your Credit Score
If you are planning on buying a home and and getting a mortgage, knowing your credit score before you start looking is a critical piece of information, particularly in today's low inventory environment. When mortgage lenders review your credit they are focused on a variety of things such as your timeliness in making your payments, have successfully paid your debts, how much credit you are using and more. Your Credit Score Will in Large Part Determine Your Mortgage Rate.
While your credit score isn't the only deciding factor when being considered for a mortgage, it is most definitely a significant one. Your credit score is commonly referred to as a FICO score and can range from 350 on the low end to 850 on the high side. A score of 740 or above is generally considered excellent, but you do not have to have a score that high in order to qualify for a mortgage. Many credit card companies and credit monitoring aps now offer "free" credit scores/monitoring but none offer a complete credit report from the three major credit reporting companies which are TransUnion, EquiFax and Experian. Everyone is entitled to one free complete credit score from the three credit bureaus per Government regulations. This can be accessed online at AnnualCreditReport.com
Exploring and getting started with a trusted lender in order to get fully pre-approved is a vital first step for any home buyer and the only way for a home buyer to fully understand how their existing credit score will impact the mortgage terms and rates available to them and to understand what their monthly mortgage amount will be once they buy a home.
While every lender will want to pull your credit scores as part of their decision making process, every lender has its own strategy and risk tolerance level. In other words there is no one single ""cutoff score" that is used by every lender in every situation. There are multiple additional factors that a lender will use in determining exactly what type of mortgage rate they will offer you.
If you are looking to improve your credit score here are the basic steps anyone can take to do so:
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 something, don’t apply for additional credit. When you apply for new credit, it could result in a hard inquiry on your credit that drops your score. {As an aside when shopping lenders for the best deal, don't sweat them pulling your credit scores, these are known as "soft" inquiries and won't impact your credit score.
My NC Homes has a variety of trusted experienced lenders that we are happy to share with our buyers along with almost 7 decades worth of experience helping both buyers and sellers. Contact us with your questions or to find out how we can help you make your home buying dream a reality.
