Credit & The Home Buying Process: What Impacts Credit, Credit Tips, & Applying For Your Mortgage
One of the questions we hear often is how does one's credit score affect the home buying process. It’s no secret that credit and your credit score play a large role in buying a house, but what exactly does it affect, how does it impact your loan product options, and what, if anything, can you do to improve it?
When thinking about getting approved for a mortgage, it’s important to understand that your lender is evaluating your ability, your stability and your willingness to repay the money they lend you. Your credit score tells lenders just how likely you are to pay your mortgage on time every month.
What Impacts a Credit Score?
Several factors play into the makeup of your credit score. This includes your payment history, the length of your credit history, the amount you owe, your mix of credit in use, and new credit. Because your credit score is made up of many components, it can also be affected by many components.
Credit & The Home Buying Process
Lenders often operate on risk-based pricing. This means that they will consider every risk associated with your financial picture to determine your mortgage rate. The difference between a “poor” and a “good” credit score could mean tens of thousands of dollars in savings over the life of your home loan.
It’s important to recognize that we don’t have one credit score. We actually have three, and each one is considered by your lender when applying for a mortgage. Your lender will consider your median credit score, your credit history, debt to income ratio, and other parts of your entire financial picture to decide your final mortgage rate.
One last thing to recognize is that there are credit requirements for every mortgage product. Each loan product is designed to help those in specific situations achieve homeownership and therefore vary in requirements and guidelines for qualification. Your lender will work with you to find the best loan product for you and your specific situation.
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Copyright©2020 Fairway Independent Mortgage Corporation. NMLS#2289. 4750 S. Biltmore Lane, Madison, WI 53718, 1-866-912-4800. All rights reserved. Pre-approval is based on a preliminary review of credit information provided to Fairway Independent Mortgage Corporation which has not been reviewed by Underwriting. Final loan approval is subject to a full Underwriting review of support documentation including, but not limited to, applicants’ creditworthiness, assets, and income information, and a satisfactory appraisal. This is not an offer to enter into an agreement. Not all customers will qualify. Information, rates, and programs are subject to change without notice. Fairway is not affiliated with any government agencies. These materials are not from HUD or FHA
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