The Important Role Credit Plays In The Mortgage Loan Application Process
Home loans are not easy to secure when your credit is in the toilet. Even during the subprime mortgage rate era, a score south of 600 would have taken you out of the equation. Working to maintain a good credit score is an integral part of the home buying process.
Mortgage Loan Approval
Without a good credit score, attempting to get approved for a mortgage loan is like pulling teeth. Larger down payment may close the gap a little, but it’s not going to make up all the difference. The truth is that with bad credit, you’re going to significantly overpay for your home.
A higher interest rate means you pay much more money over the life of the loan. It’s one thing to pay a higher interest rate on a smaller personal loan balance. It’s a completely different story with mortgage loans, which carry hefty balances.
Save On Interest
Look at the amortization schedules for 30-year fixed-rate $250k mortgages, one at 5 percent, and the other at 6 percent. That difference in the interest rate may not seem very substantial, but the amortization schedules speak the truth.
Consumers save a ton on interest when they have better credit scores. Imagine putting those significant savings to work for your family with extra home improvement projects. Failure to familiarize yourself with your credit score and situation before attempting to buy a home, however, could leave you in a poor house.
Knowing your credit score before applying for a mortgage loan is only part of the picture. You also need to understand your credit report and how lenders are going to view this information. While you need to dissect your credit report and look for errors and ways to improve your overall score, credit experts are always on standby to lend a helping hand.
There are three major credit bureaus: Experian, Equifax, and TransUnion. Mortgage lenders do not all use the same credit bureaus when pulling reports. Each credit bureau files a report attached to your social security number, and the information on each report is never going to be entirely identical.
The takeaway here is that many consumers find credit experts helpful when attempting to dissect credit reports in preparation for the mortgage loan approval process.
Credit prep should be done by every consumer months ahead of applying for a mortgage. How early you start the process depends on your credit score and situation.
The best rates are given to people with a credit score above 760. Securing a stellar rate requires minimum a score of 700, which is considered the baseline for “good credit.” Disputing inaccuracies and determining the best course of action for all accounts and information listed on your report is key to making improvements well ahead of time that help you get the best interest rate when applying for a home loan. The best way we have found to build your credit is to purchase Personal Tradelines, as this is an effective way to easily boost your credit.
There are many steps to getting ready and applying for a home loan. Familiarizing yourself with your credit report and score is one of the most important aspects of the mortgage loan application process. Get caught red-handed with a bad credit score, and you either take on a home loan that breaks the bank or you have to keep renting.