Buying a house is one of the most exciting experiences a person can ever have. But it is also one of the most overwhelming, complicated, and often times, confusing. Add to this the possibility of getting high interest rates or application rejection, and you no longer have to wonder why many residents decide to remain renters.
You don’t have to give up your dreams of becoming a homeowner. A mortgage company in Phoenix, Arizona cites several ways to reduce the costs associated with owning a home. Understanding the role your credit score plays is one of them.
Influencing Loan Qualifications
Your credit score can determine whether you qualify for a mortgage or not. Note that even if you have plenty of other assets, such as a considerable income and various investments, a mortgage lender can still reject your loan applicant due to a poor credit score. And even if you do qualify, chances are the lender would charge a high interest rate.
Scores That Warrant Good Interest Rates
Mortgage companies use different credit scoring models. But they still use similar criteria for determining a housing loan applicant’s eligibility. For instance, having a score of 720 or higher means you have an “excellent” score. With this, you can receive the best mortgage rate in Phoenix.
Scores between 700 and 719 are classified as “very good”, while those between 680 and 699 qualify as “good”. You can expect to have a hard time getting a good rate once your score drops to 640 or even lower.
You can reduce the overall cost of your home loan by improving your credit score. Paying off a huge chunk of your outstanding debts and making sure you meet your financial responsibilities on time can go a long way in boosting your score. Proving that you can take care of your finances will take you a step closer to receiving a much better mortgage rate.