People who want to own a house will do everything to find a home to purchase and a lender that will finance the house. The idea of getting a good mortgage, one that charges the lowest rate of interest, is often times overlooked.
People who are eager to shop for homes do not bother to consider the amount of money they could have saved if they get a mortgage with the lowest rate of interest. A lower interest rate will translate to hundreds of dollars saved each month in lower mortgage payments.
The same lower interest rate will save a homeowner tens of thousands of dollars over the course of the home mortgage.
Mortgage interest rates are now at one of the lowest rates in years. Interest rates could go as low as 3.25%, which means the borrower should have to pay only $435 a month for every $100,000 of loan.
But the low interest rates come with a caveat; they are available only to borrowers with sterling credit. Whether you are buying a home for the first time or you are refinancing an existing mortgage, you can take advantage of the low interest rate and save a lot of money if your credit scores are excellent.
While it is still possible to get lower interest rates even if your credit scores are not perfect, you will not be able to get the lowest interest rate.
The lowest interest rates for people with excellent credit scores underscores the significance of maintaining high credit scores. You have to be careful with the financial decisions and actions you make in order that your credit scores will not be impacted negatively.
Delaying your mortgage, credit cards, and other payments will definitely have adverse effects on your credit score. People who are planning to buy a house or homeowners who are intending to refinance their mortgage must take good care of their credit standing.
A credit score represents the creditworthiness of a person, expressed numerically based on the level analysis of the person’s credit files. It is primarily based on the credit report information from credit bureaus.
Credit scores are used by lenders, which include banks and credit card companies, in evaluating the potential risk of lending money to a person or group of persons. The intention of the lenders is to mitigate their losses by avoiding lending money to people with bad credit.
Lenders use credit scores in determining who should be getting the loan. The rate of interest rates charged on the loan shall be based on the creditworthiness of the borrower, with borrowers with good credit scores charged with lower interest rates.
The use of credit scores are not limited to banks and lenders, as many people and organizations, such as landlords, insurance companies, phone companies, and car dealers use the same technique of establishing the creditworthiness of tenants, subscribers, or buyers.
A good credit score is an important determining factor when a person borrows money. It is also the main basis of the rate of interest the borrower will be charged by the lender. The higher your credit score is when you get a loan, the lower interest rate the lender will be charging you.
However, getting a good credit score can be tricky, as it depends on the credit bureau the lender will be sourcing information from. There are different credit bureaus and they may have scored your credit worthiness differently.
You may have good scores in one but another credit bureau might have scored you fair. But typically, lenders use credit information from more than one credit bureau.
There are different credit score ranges available to lenders. The following are the credit score ranges from the different scoring models:
• FICO Score – 300 – 850
• Vantage Score – 300 – 850
• Vantage Score scale – 501 – 990
• TransUnion Score – 300 – 850
• Experian PLUS – 330 – 830
• Equifax Score – 280 – 850
The FICO Score of a borrower comes with the corresponding creditworthiness rating and its impact of his application for a loan. The following are the FICO Score ranges:
• 800 – 850 – The borrower has an exceptional credit rating. He is eligible for the lowest interest rates from the lenders.
• 740 – 700 – The borrower has a very good credit rating. The applicant will receive better than average interest rates from lenders.
• 670 – 739 – The borrower has a good credit rating. A small percentage of applicants in this range may turn out delinquent in the future. Applicants will receive an average rate of interest from lenders.
• 580 – 669 – The borrower has a fair credit rating. He falls in the category of subprime borrowers.
• 300 – 579 – The borrower has a very poor credit rating. The applicant is likely to be denied a loan, or he may be required to pay a deposit.
FICO Scores are the most widely used measure of borrowers’ creditworthiness. Created by the Fair Isaac Corporation, FICO Scores are used by about 90% of the country’s top lenders. FICO Scores are calculated using the borrower’s information in different consumer reports and by comparing this set of information to the patterns in the thousands of past credit reports.
Many lenders use FICO Scores and other credit scoring models to arrive at the decision of granting or denying loan applications, and determining the appropriate rate of interests to be charged. However, no credit scores can specifically identify good from bad customers.
To the average borrower, a credit score looks like a random set of three numbers determined by some mysterious algorithm but it means a lot to the lenders in granting approval to a home loan. Low credit scores are indicative of risky borrowers while high scores will significantly upgrade the mortgage terms granted to the borrower.
Many potential borrowers are concerned about the lowest possible score that may qualify them for a home loan or refinancing. The minimum credit score requirement depends on the type of loan a borrower is considering.
Mortgage loans guaranteed by the Federal Housing Administration (FHA) require the lowest credit scores to qualify. Borrowers with credit scores of 580 can qualify for a home loan provided they put up a 3.5% down payment.
For conventional loans, those loans not guaranteed or insured by government agencies, such as the FHA or the VA, lenders generally look for a credit score of 620 and better. VA loans do not require a minimum credit score but most VA lenders do, usually looking for scores in the range of 620 and 640.
Ideally, home loan or refinancing applicants should have at least a 660 credit score to be assured of an approval and a better interest rate and avoid going through additional requirements. More than a loan or refinancing approval, your credit score higher than the minimum requirements of most lenders will drastically change the interest rate of the home loan or refinancing.
A good credit score will also lower the amount you will pay in private mortgage insurance (PMI) when it is applicable. To illustrate this, the difference between a 680 credit score and a 740 or over credit score could translate to 0.25% to 0.0375%.
While the monthly reduction in mortgage or refinancing payment with a 2.5% reduction of interest rate, it will save you several thousands of dollars over the course of your loan.
If your credit score is excellent, you are likely a candidate to receive the lowest interest rate lenders are currently charging, in addition to having the lenders immediately grant approval to your home loan or refinancing application.
When you have good credit, more financial opportunities and options will be available to you. Your credit history is one of the important factors that lenders will consider when you apply for a home loan or refinance.
Building a good credit history will make your loan or refinance application more likely to get approved at the best interest rates possible. Lenders offer better terms and demand less rigorous requirements from loan or refinancing applicants with good credit.
You should build a good credit history long before you even consider applying for a home loan or a refinance. The keys to having good credit include careful management of your money, paying your bills and loans on time. You should stay within your credit limits and avoid over borrowing. Make sure you borrow or charge an amount you can pay back.
Good credit will make it a lot easier for you to buy a home or refinance your mortgage with the lowest interest rate possible. As previously mentioned, a reduction of 0.25% in your interest rate could save you thousands of dollars over the life of your loan.
People want more things in addition to owning a home. After you get approved for a loan or a refinance, you will need a good job to enable you to pay the monthly amortization of your loan. Your ability to get a good job is also affected by your credit score.
More and more employers take credit scores into account in their decision to hire employees. It is based on the assumption that people with good credit are trustworthy and responsible – traits that will be useful in any place of employment.
You can also finance cars and purchase furniture and appliances for your new home or your refinanced home. All of these will be easy to accomplish when you have good credit scores. Car dealership and stores will not hesitate to extend you credit because of your good credit score.
Catostore Home Loans can help you secure a home loan or refinancing of your current mortgage, especially when you have a good credit score. The company provides excellent customer service and their goal is to create satisfied customers.
The company aims to satisfy the different home loan or refinancing needs of their customers while eliminating all the common problems applicants for a home loan or refinancing usually go through. It will be a great advantage to you if your credit score is good, but Catostore Home Loans will help you get a home loan or refinancing regardless of your credit score.
Applicants for a home loan or refinance receive from Catostore Home Loan the best options and benefits that they may be entitled to.