If you’re doing some research about buying and financing a home, you may have come across resources saying how much your credit score can affect your mortgage application. While the credit score requirement varies from lender to lender, it is still important to take note that you are likely to get the best rates and terms with an excellent score.
Getting a Loan with a Less-Than-Stellar Credit Score
If you’re thinking of getting a home loan with a less-than-perfect credit score, you can still get your application approved. PRMI Franklin and other mortgage companies in Franklin, TN note that it all comes down to finding the right lender or loan program. The Federal Housing Association (FHA) loan, for instance, requires a minimum score of 580 to obtain a loan with a low down payment of just 3.5%.
This makes FHA loan a great choice, not just for those with less-than-stellar credit, but also for those who can’t make a large initial payment. It’s popular among first-time homebuyers, but anyone who can meet the basic requirements can get this loan. It is also easier to get approved for this loan, as it backed by the government, which gives lenders some sort of financial protection.
Reporting and Correcting Credit Problems
If you’re thinking of buying a home, it is never a good idea to shop for loans or look for houses without checking your credit report. Getting one and reviewing your score enables you to determine problems and fix anything that could potentially ruin your application. This is especially true if you haven’t checked your score for quite a long time.
It is good to know that those who borrow with a high credit score are more likely to get better interest rates. This can affect not just your monthly loan payment, but also the amount of property you can afford. You should also note that it could take a few months or more to repair a credit problem, but this will still depend on the number of errors to be corrected.
Raising Your Credit Score
If there is no issue in your credit but have a low score, it is advisable to do anything you can to improve your score. This is mainly because having a good credit translates to better rates, which can result in significant savings over the life of the mortgage. While it is true that you can get a loan with a poor score, you are also likely to end up paying a lot more interest over time.
Here a few tips on improving your score:
- Pay your bills on time (set-up reminders)
- Pay off your debts (don’t move or transfer them into other accounts).
- Keep credit card balances low.
- Don’t close unused credit cards just to improve your score.
- Avoid applying for a number of new credit cards.
- Spend wisely and use your credit responsibly.
- Report credit errors to have them corrected right away.
Your credit score may be just one of the many things that your lender will look at before approving your application, but it is an important requirement. If you’re serious about buying a home and want to score better loan terms and rate, mind your credit score. You should also get in touch with a reliable lender to find out how you can make yourself an attractive borrower.