The housing marketing is thriving again and interest rates have been on a steady incline over the last several months. With interest rates climbing it’s even more important for buyers to be prepared with excellent credit ratings so they can reap the lowest scores available.
Purchasing a home can be an exciting and graceful process if applicants take the time to prepare in advance. Many new home buyers do not consider the impact their credit can have on financing a home, and do not know that they should be planning 12 – 18 months ahead of applying. it’s also true that many people think their ‘fair’ or even ‘good’ credit is strong enough. While you might get approved for a mortgage with lower credit scores, your interest rates will be significantly higher than those with A+ credit.
Zillow Research did a study on credit scores and interest rates. They found that a borrower with ‘fair” credit (score between 640 and 679) could end up paying $720 more per year on interest, than someone will an excellent credit score. Over 30 years this would cost the borrower approximately $21,000 in interest. Zillow also mentions that the impact of lower scores will be greater depending on your location – since home prices vary so greatly throughout the nation rates offered by lenders will very as well.
A personal credit score assesses not only the amount of debt a client owes and whether they are presently current, but also the risk they present if they default. This means that just because you are paying on time now does not mean your payment history will be excluded from your FICO score. The majority of home buyers cannot accurately identify the factors in the process of buying a home that a credit score affects. Credit and scores impact a variety of aspects including, interest rate, the amount borrowed, and the lending terms of their mortgage.
Consumers can easily make the mistake of checking their credit scores only several months before buying a home and may check the wrong score model. With this in mind, it is imperative to check credit scores as soon as you’re considering purchasing a new home to make sure you know where your FICO mortgage lending score stands. By being proactive and consulting with us as needed, consumers will allow themselves ample time to improve credit scores and/or correct any issues that could negatively affect their scores.