If you’re planning to buy a home this year, one fairly important factor that comes into play is your credit score. No matter which lender you choose, they will go through your report and only then offer you a rate.
Take care of your score now and then apply for a loan, when it is acceptable. The rates suffered on low credit scores are higher, and over the mortgage term, it means paying huge amounts as interest that you could have used for some other major expense, had you planned smartly.
Let us give you an example. If your score is around 220, you will be given a rate of 5.4% for a 30 year fixed mortgage. On the other hand, if your score is around 680, you will be given a rate around 4.9%. With a credit score touching the 740 range, your rates fall down to 4.025%. Right now, the difference the three rates is just in points, but when you calculate the interest amount for the entire loan term, these little differences lead to huge changes.
A real estate professional told us that a high credit score can save you over $100 a month. Consider a loan term of 30 years, and this equals $360,000. This is pretty significant don’t you think?
The interest rates are not the only benefit that comes with a good credit report. There are other advantages as well. Usually, if your credit score is higher, you can apply for better loan programs which mean less complications in the approval process and faster loan processing.
According to a loan officer, if your credit score is low, you have two major obstacles to deal with. We have already mentioned one of these, which is greater interest amounts. The second obstacle is that your income should also be higher, indicating that you can afford the monthly payments.
The main point of all this discussion is that if you want to a buy a home, you must have a good credit score. The higher this is, the better it will be. We suggest that before you apply for any loans, go through your own credit report first. They must contain no errors and must be updated.
Since there are three different credit reports, most of the lenders use an average of these three scores. In case your score is low, contact a financial expert for some advice.
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