Credit Score and Your Mortgage

FirstAgain:  

Summary

Your credit score is one of the most important factors when you apply for a mortgage. Although it is not always a deal breaker when you apply for a mortgage, your credit score usually affects what interest rate you are offered.

Generally speaking, the higher your credit rating is the lower your interest rate will be, and the lower your monthly payment will be.

Credit Score Basics

A person usually has 3 different credit scores provided by each of 3 different credit bureaus. The middle score is the “mid score”.

Credit ranges are:

• Over 720 is excellent

• 680-720 very good

• 620-679 good

• 500-619 – sub prime

• Less than 500 – very sub prime

Lenders usually have specific interest rates offered for people with different ranges of credit scores and loan programs.

Factors That Help You

If your property has a lot of equity in a refinance or you are putting down a large down payment on a purchase the lender rates will generally improve.

There are three basic ways to document your background in a mortgage application: full documentation, stated documentation, and no documentation. Full documentation involves disclosing your income, asset, and employment information. Stated documentation involves less documentation than this, and no documentation is a minimum level of documentation. If you can provide full documentation you should do this as it helps get you a better interest rate.

Some lenders will allow you do use a non-resident co-borrower on your application. This is adding someone to the loan who is not living in the property. This is usually done to because the additional person has a higher credit score or income needed to get the loan.