How Your Credit Score Affects Your Mortgage Rate

by | Apr 23, 2020

Advertising Disclosure

Any opinions, analyses, reviews or recommendations expressed in editorial content are of the author alone, and have not been reviewed, approved, or otherwise endorsed by the advertiser. We make every effort to provide up-to-date information, however we do not guarantee the accuracy of the information presented. Consumers should verify terms and conditions with the institution providing the products. Articles may contain some sponsored content, content about affiliated entities, or content about clients in the network.

Editorial Note

LowerMyBills is compensated by third-party advertisers, however, any opinions, analyses, reviews or recommendations expressed in editorial content are of the author alone, and have not been reviewed, approved, or otherwise endorsed by the advertiser. While reasonable efforts are made to maintain accurate information, the information is presented without warranty.

Buying a home involves numerous steps that can make the whole process extremely wearing. Choosing to work on your credit is as vital as making sure your credit score is at a good level. Americans have a credit score averaging out to 687, according to Experian’s most recent report.

What is Your Credit Score?

Credit scores are one of the ways lenders determine how much of a risk you are as a borrower and is a large determining factor to your mortgage. Your credit score is important for the application process, but your credit score is not the determining factor in whether you are approved for the loan or not. Your credit score mainly dictates your mortgage loan rate. The minimum time required to calculate your credit score is six months. If you have no history of credit, then you should start looking into building your credit immediately. As discussed previously, there are ways to get around having less than exemplary credit. Having no credit, however, is a completely different story and requires a lot more effort on everybody’s parts.

Credit Scores’ Impact on Mortgages

Credit scores largely determine how much your mortgage rate will be. The better the credit score you have, the better the mortgage rate. Even the slightest difference of a few percentage points can make a significant difference of several thousands of dollars to your total mortgage payment. Hence getting your credit score as high as possible might lead to thousands of dollars saved from your mortgage loan. Of course, this can vary by state, loan amount, and type of loan but the evidence is clear that a higher credit score, the more you save. Raising your credit score cannot be done in a few weeks, therefore if you want to get the best mortgage rate then you must start now. Certainly, your credit score is not the only factor that determines your mortgage loan rate but it is one of the aspects that carries much of the weight.

Latest Articles

Home Buying Inspection: The Complete Guide
Home Buying Inspection: The Complete Guide

Looking at houses, imagining them as your own, is exciting. Arranging your furniture in your mind's eye and thinking about putting down roots is all a part of the home buying process.  But some more daunting steps are part of the process too. Saving for a...

USDA Home Loan Requirements Explained
USDA Home Loan Requirements Explained

Millions of people buy homes each year. More than 5.34 million houses sold to new owners in 2019 alone. While many of those buyers financed their homes with conventional mortgages, others turned to federally-backed loans to help them get into the house of their...

Pros And Cons Of A No Closing Cost Refinance
Pros And Cons Of A No Closing Cost Refinance

With mortgage rates at extremely low levels, the desire to refinance has never been stronger. If you're thinking of refinancing your home, is a no closing cost refinance the right option for you? Read on to learn more about this type of financing and the pros and cons...

Beware! Banks Are Tightening Their Lending Standards?
Beware! Banks Are Tightening Their Lending Standards?

The Federal Reserve dropped interest rates to 0 percent to stimulate the economy during COVID-19. It's a move last seen during the 2008 housing crisis after the economy collapsed due to poor lending standards and subprime mortgages. Slashed interest rates might make...

What is a Home Equity Conversion Mortgage?
What is a Home Equity Conversion Mortgage?

A Home Equity Conversion Mortgage (HECM) is a type of mortgage that is insured by the Federal Housing Administration (FHA) and was passed by Ronald Reagan in February 1988. HECMs are more commonly known as a Reverse Mortgage and is something that is only offered to...

How to Prepare to Buy a House in One Year
How to Prepare to Buy a House in One Year

59% of Americans consider home ownership to be part of the American dream. You don't just want to purchase a property eventually, though. If you are interested in buying a house in one year, read on for the tools to make that dream a reality.  Here's how to save...