Having a bad credit score can affect your ability to take out a home mortgage loan. In fact, it may even lend to failed mortgage negotiations.
Given the hard times we live in, it is even more important for lenders to tighten their requirements. As having good or even perfect scores are often lenders’ requests, you should pay very close attention on every cent spent.
Lenders – meaning banks, mortgage companies, and credit unions – use your credit score to judge whether you are able to handle credit and if you are financially responsible. If your credit score is mediocre, lenders terms will be less favorable to you. You may need to pay higher fees to obtain the mortgage; you may also have a higher interest rate, which causes the monthly payment amount to be proportionally higher.
Conversely, responsible borrowers – as determined by the credit score test – typically enjoy better loan terms, including lower fees and better interest rates. Lenders may also allow for a higher borrowing limit for the very best scores.
As important as the credit score is, there are other important factors. You have to have documented income, of a sufficient amount to indicate that you would be able to pay the monthly mortgage payment. Length of employment history also plays a factor; lenders prefer to lend to individuals who have a proven earnings track record. Keep in mind that even if you have held a great job for years but have a poor credit score, the credit score remains the primary criterion in the eyes of the lender.
The actual interest rate for the mortgage, fees and loan amount are based on your credit score. It is good advice to get a copy of your credit report before starting the mortgage application. Review it for inaccuracies, and if any are found, have it corrected.
Whenever you need to apply for a mortgage loan, make sure you have are able to get a 720 credit score rating. They range from 330 to around 850, so keep a close eye on your finances.
The most important lesson is to understand that your credit is an indication of your financial responsibility. Safeguard your financial and credit information, and work to raise your credit score. This is the most important step on the road to home ownership.
This author has been blogging on credit reports for the past three years. Additionally, this author enjoys providing knowledge about New York City real estate, like Jackson Heights real estate in addition to Sunnyside real estate.