Debt Kit -- Settle unsecured debts for less than half of amount owed Credit Kit -- Improve your credit rating and reduce monthly payments by $200+ |
Credit > Mortgages and Credit Scores |
As the above table illustrates, those with credit scores below 630 are not a very good risk, so they will obtain a mortgage at a significantly higher interest rate and this will add anywhere from $50 to about $250 to their monthy mortgage payment and add thousands to the price of the home. If your score is 660 or above, you can get a mortgage loan fairly easily since you are a pretty good risk. As stated above, the higher your score the lower your interest rate, so your goal shouldn't be to obtain a credit score of 660; it should be to achieve a credit score of at least 700. Some lenders will reward you if your credit score is higher than 725, by lowering your interest rate by about 1/4th of a percent. If it is between 700 and 724, it will be lowered by 1/8th of a percent. Does an interest point or two make such a big difference in the price of the house? You bet it does! It means saving thousands in finance charges and a lower monthly payment. For example, paying an interest rate just two points higher means paying an additional $200 each month on your house payment on the typical $150,000, 30-year mortgage loan. That's at least $72,000 more you're going to pay for your house! There are steps you can take to raise your credit score or overcome a low credit score: (1) Offer a larger down payment so that you aren't borrowing so much money (2) Lower your debt-to-income ratio by paying off as much debt as you possibly can before applying for a mortgage loan in order to increase your credit score (3) Don't buy a car just before applying for a mortgage loan as it lowers your credit score |
Mortgages and Credit Scores |
Today, credit scores plays a big role in determining whether or not your mortgage loan is approved and at what interest rate. Obtaining a mortgage loan at an interest rate just one point less results in a savings of about $5,000 on the average 15 year mortgage, and significantly more on a 30 year mortgage (about $50,000). Why do lenders use your credit score in their lending decisions? Because they discovered that there is a direct correlation between your credit score and the odds of your becoming delinquent on your monthly mortgage payments. Consider the following statistics the mortgage industry has compiled: |
If Your Credit Score Is 780 700 680 660 645 630 615 600 585 |
Your Odds of Becoming 90 Days Delinquent are 576 to 1 288 to 1 144 to 1 72 to 1 36 to 1 18 to 1 9 to 1 4 to 1 2 to 1 |
As the above table illustrates, those with credit scores below 630 are not a very good risk, so they will obtain a mortgage at a significantly higher interest rate and this will add anywhere from $50 to about $250 to their monthy mortgage payment and add thousands to the price of the home. If your score is 660 or above, you can get a mortgage loan fairly easily since you are a pretty good risk. As stated above, the higher your score the lower your interest rate, so your goal shouldn't be to obtain a credit score of 660; it should be to achieve a credit score of at least 700. Some lenders will reward you if your credit score is higher than 725, by lowering your interest rate by about 1/4th of a percent. If it is between 700 and 724, it will be lowered by 1/8th of a percent. Does an interest point or two make such a big difference in the price of the house? You bet it does! It means saving thousands in finance charges and a lower monthly payment. For example, paying an interest rate just two points higher means paying an additional $200 each month on your house payment on the typical $150,000, 30-year mortgage loan. That's at least $72,000 more you're going to pay for your house! There are steps you can take to raise your credit score or overcome a low credit score: (1) Offer a larger down payment so that you aren't borrowing so much money (2) Lower your debt-to-income ratio by paying off as much debt as you possibly can before applying for a mortgage loan in order to increase your credit score (3) Don't buy a car just before applying for a mortgage loan as it lowers your credit score |
Credit > Mortgages and Credit Scores |
Debt Kit -- Settle unsecured debts for less than half of amount owed Credit Kit -- Improve your credit rating and reduce monthly payments by $200+ |
