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As we usher in the new year, the prospect of purchasing a home may be a prominent goal on your mind. It's an exhilarating ambition, and the perfect time to begin planning is now. A vital aspect of gearing up for homeownership is establishing a strong credit score.
Lenders review your credit to evaluate your ability to make timely payments, repay debts, and more. Your credit score is also a factor that helps determine your mortgage rate. As CNBC explains: “When it comes to mortgages, a higher credit score can save you thousands of dollars over time. Your credit score directly impacts your mortgage rate, which determines the amount of interest you'll pay over the life of the loan.”
This means that right now, your credit score might feel even more crucial to your homebuying plans since mortgage rates are a key factor in affordability, particularly in the current market.
According to the Federal Reserve Bank of New York, the median credit score in the U.S. for those taking out a mortgage is 770. However, you don't need a perfect score to buy a house. As Business Insider notes, aiming for a 'Good' range (670 to 739) is a great start toward qualifying for a mortgage. To access the lowest rates, strive for a 'Very Good' range (740 to 799).
Consulting with a trusted lender is the best way to understand how your credit score might impact your home loan and mortgage rate. As FICO states: “While many lenders use credit scores like FICO Scores to help them make lending decisions, each lender has its strategy, including the level of risk it finds acceptable. There is no single 'cutoff score' used by all lenders and there are many additional factors that lenders use to determine your actual interest rates.”
If you're aiming to improve your score, Experian suggests focusing on:
Your Payment History: Late payments can negatively impact your score. Aim to make payments on time and quickly address any existing late charges.
Your Debt Amount (relative to your credit limits): The less of your available credit you're using, the better. Strive to keep this number as low as possible.
Credit Applications: Avoid applying for additional credit when you're looking to buy something. New credit applications can result in hard inquiries that may lower your score.
An Evergreen lender will guide you through the process from start to finish, assessing your score range and informing you about the specifics for each loan type.
As you focus on buying a home this year, concentrating on boosting your credit score could secure you a better mortgage rate when you're ready to make a move.
To schedule a free one on one consultation with an expert, connect with a trusted local lender!
Source: Keeping Current Matters
