Understanding Impact Credit Scores in the Home-Buying process is crucial if you’re considering purchasing a home. Your credit score is a critical piece of the puzzle when it comes to qualifying for a mortgage.
Importance of Credit Scores
“A credit score isn’t the only deciding factor on your mortgage application, but it’s a significant one. So, when you’re house shopping, it’s important to know where your credit stands and how to use it to get the best mortgage rate possible.”
Median Credit Score and Mortgage Rates
Mortgage rates are a key factor in affordability, making your credit score even more important to your homebuying plans. 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, perfection is not necessary. As explained by US Bank:
“Your credit score (commonly called a FICO Score) can range from 300 at the low end to 850 at the high end. A score of 740 or above is generally considered very good, but you don’t need that score or above to buy a home.”
Lender Considerations
Working with a trusted lender is crucial to understanding how your credit score could factor into your home loan and the mortgage rate you’re able to get. Each lender has its own strategy, as FICO states:
“While many lenders use credit scores like FICO Scores to help them make lending decisions, each lender has its own 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 may use to determine your actual interest rates.”
Tips for Improving Credit Score
If you’re looking for ways to improve your score, Experian highlights some key areas to focus on:
- Payment History: Late payments can have a negative impact by dropping your score. Focus on making payments on time and paying any existing late charges quickly.
- Debt Amount: When it comes to your available credit amount, the less you’re using, the better. Focus on keeping this number as low as possible.
- Credit Applications: Avoid applying for new credit, which can result in hard inquiries on your credit that may lower your score.
Conclusion
Finding ways to make your credit score better could help you secure a lower mortgage rate. For more information, consult with a trusted lender. Understanding how credit scores influence the home-buying process empowers you to take proactive steps toward achieving your homeownership goals.
Recently I recorded this video and you can find it on my socials @danielle_your_realtor or take the chance and watch it right below.
Top Charlotte Real Estate Agent As Seen on House Hunters Charlotte guiding her buyer Lyndsay on her relocation.
Charlotte Real Estate Agent
Danielle Edwards
danielleedwards@REMAX.net
704-604-2999
