The Importance of Credit Score When Applying For Mortgage Financing
When applying for mortgage financing, your credit score is going to be one of the first things a potential lender looks at. Especially these days when lenders are tightening lending requirements, a good score can be especially important.
Credit scores are used by mortgage lenders to determine your level of financial responsibility. A low credit score may indicate that you might be a bad credit risk, which might mean that you could default on your mortgage loan.
Of course, other factors are also taken into consideration when applying for a mortgage loan, such as a person’s income and employment status. However, the credit score can often be the deciding factor.
Even if you are approved for a mortgage loan with less than perfect credit, there will be a price to be paid. This is because only individuals who have good credit ratings will qualify for the best interest rates.
It might seem as though the better interest rate for good credit buyers is somewhat inconsequential. But, when you calculate the cost of the extra interest over the lifetime of the mortgage, it can really add up to a lot of extra expense.
Credit scores are calculated using a number of different factors, including your payment history, level of debt and any problems you’ve had in regards to making payments on a timely basis. Credit scores range from approximately 330 to 850, but you’ll want to strive for a rating of 720 or above to get the best mortgage interest rates.
Before shopping for a home, it is important to check your own credit rating, as sometimes mistakes are made. Doing this approximately six months before you anticipate applying for a mortgage loan can give you plenty of time to find and correct the mistakes, as well as time for the corrections to show up on your credit history.
It can be beneficial to try to improve your score if you find that it’s low before applying for a mortgage. Paying off some of your outstanding credit and reducing your overall level of debt can often raise your credit score dramatically.