Credit Scores & Your New Mortgage Loan
Often home buyers go to their mortgage lender to fill out their mortgage loan application only to find that their credit score will keep them from buying a home. Most often today, future home buyers need a 660-680 credit score minimum, or they simply cannot buy a home.
Mortgage lenders today, do have mortgage loan programs that will fit the needs of buyers with scores of 620-640 such as FHA or VA programs. Working with your mortgage lender, you will find long time job history and no late payments, etc., make you eligible for a mortgage that has a more competitive interest rate. Low debt to income ratios, and good payment history on credit card bills, make a difference too.
However, it is best to “look before you leap”. Seek the advice of a mortgage loan professional before you start that home search. It will save you potential heartache. I feel it is best to sit down with them, in person and have a pure understanding of what you can do and will need to do. Avoiding “online lenders” who you cannot see face to face is certainly a smart move. Also, what appears to be a good or better deal may not be. Interest rates are only one aspect of this process. Comparing good faith estimates of closing costs, side by side, is surely a must. There can often be hidden fees or more points, for example, paid up front, to get a lower interest rate. (One point typically being one percent of your loan amount, prepaid interest, to get a lower interest rate).
For those with credit scores over 700-740 you can find yourself in the “cat bird seat”, with the ability to obtain a lower interest rate due too good or above average credit scoring. For those under the 670-680 numbers you may find yourself getting “add on” interest rate figures due to lower scoring. I always try to sit in on my loan qualifications with my home buyers so I can be able to ask additional questions that home buyers do not know to ask. Also, to help problem solve, and to come up with ways to increase credit scores if necessary.
You can open a new credit card account to create credit if you have too little. Another way to show good credit is to use paid utility bills. There are creative ways to increase your credit score that mortgage lenders can assist you with as you work through the process. However, never go from lender to lender and allow your credit to be pulled. This will lower your overall score.
As always, create your home buying team. A great Realtor and a wonderful mortgage lender are key. For a list of available mortgage originators, you can always opt to visit www.lynchburgassociationofrealtors.com. There is an available list of affiliate members of our local association you can contact!