Planning to Take a Mortgage? Here are Some Factors you should consider
Your credit score plays a vital role in any important financial decision that you make. Over the years, lenders have started checking applicants’ credit scores before approving a mortgage. Landlords and recruiting companies also verify an individual’s credit history before renting an apartment or making a job offer. The interest you pay on a loan will largely depend on your credit score. People with a credit score of 740 or higher are much more likely to be offered the best mortgage interest rates. Impact of Credit Score on Your Mortgage Rate The interest you pay on a mortgage can add up to thousands of dollars over the tenure of the loan. The higher your credit score is, the lower the interest you will have to pay. A good credit score argues well for your financial stability as even a fractional increase in the interest rate can add up to a significant amount of money. While a good credit score results in quick approval of your mortgage loan application and low interest rate, a bad score may make you ineligible for the loan itself. The subprime crisis of 2008 has resulted in stringent lending regulations for the home loan approval process. Today securing a mortgage loan with a credit score of 620 or below is almost next to impossible.
Factors that Lenders Look For Investors expect better returns, especially when they make a significant investment and a mortgage loan is no exception. Lenders prefer borrowers with a low debt-to-income ratio, a perfect mix of credit utilization, and a consistent-time payment history. They take into consideration several factors such as your debt utilization ratio, length of credit history, and how many inquiries are present on your report. In addition to these factors, the lenders also consider your outstanding debts, savings, total assets and current income before approving your loan request. Steps You Should Take If you are planning to buy a home in the future, avoid applying for new credit. Doing so will have a negative impact on your credit score. Your credit score will also drop if you have too many credit accounts, so make sure not to open a multiple of new accounts. Dealing with a low credit score can be made easier if you rope in the services of a reputed credit repair company. Such a company will educate you about maintaining a good credit score in the future. It will also ensure the credit bureaus list entries correctly on your credit report so you don’t suffer from a low credit score on account of inaccurate or unverifiable information. Source: MerchantCircle