Before applying for a mortgage, you will want to learn your credit score. This number, which will range from 350 to 850, is the number that the lender will use to determine if you qualify and the interest rate you will get on the loan. If you are asking how credit scores impact mortgages, then keep reading to learn more.
A mortgage is a long-term commitment that you make when buying a home. The payments you become responsible to make month after month could end up being a real problem if they are higher than you can comfortably afford.
If you run into financial trouble and have difficulty making the payments, then you risk losing the house. Getting better terms on your mortgage will mean that you get lower monthly payments and longer terms to pay it back the loan. Ideally, you want to get as low a payment as possible with the opportunity to pay more into it when you can.
Your credit score will affect what kind of terms you can get on a mortgage. If it is too low, you will not even be able to get a mortgage. A score of 750 and above is considered excellent and it will enable you to get the best terms. Although some lenders will still lend you money for a mortgage down to a score of around 620, it is not to your advantage to get a loan with a score that low.
Having a credit score lower than 700 means that you will be paying more than you need to. If you get a 30-year fixed-rate mortgage for $200,000, then you may pay just $975 per month at an interest rate of 4.17%. The total amount of interest over the 30 years will be $150,833.
If your credit score ranges from 680-699, you may get an interest rate of 4.57% and a monthly payment of $1,022. Over 30 years, you will pay a total of $167,771 in interest. That means, the lower credit score will pay $16,938 more than the person with the better credit score. With a credit score of 640-659, you will pay a total of $195,938 and pay over $45,105 more than the person with excellent credit.
If your credit score is not the best and you want lower payments, then you need to work on getting a better credit score. Here are two things you can do to start:
Now that you know how credit scores impact mortgages, you also need to know that while both of the above methods will raise your credit score, they will do it slowly. So the third thing you need to know is how you can boost your credit score in 30 days or less. Adding powerful credit tradelines to your credit report can enable you to change your credit score fast. Let BoostMyScore show you how. We have been helping people improve their credit for over 12 years and we can help you too.