Great Credit Scores and Mortgages

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Summary

Your credit score is a critical measure used to determine the interest rate and fees you are offered on your mortgage.

Here is how to make the most of your high credit score.

Credit Score Basics

Your credit score is a basic financial measure that a mortgage lender will use.

First they will use it as a cut-off to see if you even qualify for a certain mortgage program. The same lender may have many different kinds of mortgages available. Usually each of these different loan programs has its own underwriting criteria.

Credit score minimums are usually set for each of the lender’s programs.

The second way a mortgage lender will use your credit score is to “price” your loan.

This means determining what kind of interest rate you are eligible for.

Your credit score is one of many factors that go into what your interest rate will be, but is can be very important.

Very often mortgage lenders will have a top down approach to credit score grading. If your credit score is between 719-700 you may be offered one rate, another rate if your score is between 680-699. This goes all the way down to the minimum credit score. The credit score referred to here is the “mid score” which is the middle credit score on your credit report. You usually have three different credit scores but the one most lenders use for lending purposes if you “mid score”.

The Best Deals

There are some mortgage lenders who focus on working with people who have great credit. This is the type of lender you should work with.

These types of lenders will often have additional incentives for borrowers with excellent credit. For example, they may lower you interest rate by 0.25% if your credit score is over 720.

There are many lenders who specialize in borrowers with bad credit. They usually do not have good loan programs for borrowers with excellent credit. They may be able to offer you a loan, but it is unlikely to be as good as an offer from a lender that usually works with high credit borrowers.

Some large lenders work with borrowers of all credit types.