Did you know that a good credit score can save you hundreds of dollars a month on mortgage payments – and possibly tens of thousands over the course of your loan?
When a borrower has a high credit score, this gives lenders confidence in their ability to repay the loan. In turn, the higher it is, the lower the interest rate they’ll be willing to give you.
A credit score is a 3-digit number generated by a mathematical algorithm using information in your credit report and is designed to predict risk. A consumer has 3 FICO scores, one for each credit report: Equifax, Experian and TransUnion.
FICO scores range from 300 to 850, where a higher number indicates lower risk. Here’s the breakdown:
According to the Federal Reserve, the median credit score of home buyers qualifying for a mortgage in the first quarter of 2019 was 759 and 75% boasted a score over 700.
Home buyers do not need a score above 700 to buy a house. However, a higher credit score means you’re given a better mortgage rate and loan options.
Keep in mind, the score you may pull from myFICO, the credit bureaus, Credit Karma, or whichever third-party was an educational credit score. These scores are provided just to give you a perspective on your credit standing. They’re not the scores that lenders actually use to approve your application. Speak with your Emerald Home Loan consultant for more information.
The data from your credit report goes into 5 categories that make up your FICO score which weighs some factors more heavily, such as payment history and debt owed.
A small improvement in your credit score (from 680-700) could save you thousands. For example, a top tier credit score versus a bottom tier credit score on a medium-priced home for a 30-year fixed could mean a savings in interest paid of $100,000. Keep in mind, there are other factors that play a role in the mortgage approval process. Some include: cost of the home, size of your down payment and your income.
Contact an EHL Loan Consultant with any questions you may have, to get pre-approved or to see what type of loan you could qualify for.