For anyone applying for a mortgage, from an online lender to a traditional brick and mortar bank or credit union, the single biggest factor in the rate you will be offered is your credit score.
For most conventional loans, having a credit score below 620 will make it very difficult to obtain a mortgage. On the other hand, for an FHA loan, the credit score can be as low as 580, but a lower score may still allow you to have this type of loan with the ability to provide a 10% down payment.
Since a new home mortgage is so dependent on credit score, it is essential that individuals or couples interested in buying a home or refinancing their current loan take the time at least 6 to 8 months in advance to start working on bringing their score to the minimum 620 mark.
Check the Reports
It is very common to find errors on a credit report from one or all three of the credit bureaus. Request your free reports and go over them carefully. You can dispute issues such as missed payments or partial payments fairly easily by providing copies of your bank records showing the payments were made.
Other issues such as incorrect past addresses or even the misspelling of your name can also impact your report, so make sure all issues on the report are correct. This also includes verifying all account numbers are correct and closed accounts indicated on the report.
Don’t Make Changes
If you are planning to take out a new home mortgage, do not do anything that will negatively impact your score. This means no new credit card applications, loans or lines of credit.
Be sure to make all minimum payments and don’t skip any payments. While it will take some time and focus, building your credit score can have a big impact on your interest rate and the total cost of the loan over time.
Let the expert lenders at Guaranteed Rate help you to find the best rate on your new home mortgage.