Posted: May 6th, 2019
When it comes to owning a new home in central Florida, a good credit score is essential. When you have a good credit score, you are able to earn a lower interest rate, which impacts the overall amount you can borrow as well as what your monthly mortgage payment will be. The interest rate also affects the time frame in which you can pay off your mortgage. Having a good credit score ensures success when it comes to a new mortgage.
Your credit score is a primary factor a lender will look at when determining the interest rate, you qualify for based on your credit history. A bad credit score results in a higher interest rate, which means more paid back over time to the bank for the full loan. With a good credit score, you pay less overall, which benefits you in the long run.
How is a Credit Score Used?
A credit score in relation to the FICO Score will range from 300 to 850. The lower range is considered bad credit while the higher range is good credit. The score is based on how you have handled credit you have been given in the past. If you pay debts on time and without any defaults, your score will increase.
With a lower score, it can be a reflection of mistakes with finances in the past. Perhaps you have not made payments on time or lapsed on a loan. When you have a low credit score, lenders may not be willing to take a chance on you with a mortgage loan. If they do, the interest rate may be extremely high in order to counterbalance their misgivings about the potential for you to pay the loan back. Financial institutions will set interest rates based on the risk the individual poses. The higher risk you are, the higher the interest rate. If you are a low credit risk, meaning you have a high credit score, then you will earn a lower interest rate on your loan.
Credit Score and Loan Rates
When it comes to a mortgage loan, an average rate will be advertised via the financial institution. If you have a good credit score, then you can qualify for the average rate or even below it. If you have a poor credit score, then you may have a rate that is above that average. Before applying for a loan, check your credit history. If you know that you have not defaulted on any loans or lines of credit, then your score should be relatively high. If you have defaulted, then you can check to see where you stand.
If your credit score is low, take time to build it up before trying to secure a mortgage loan. By increasing your score over time, you may have to wait for a new home, but you will be better off in the long run as your interest rate on the mortgage will be much lower than if you went ahead and applied without corrected past issues on your credit history.
At TradaR Real Estate Solutions, options are available to review your credit score and help you secure a quality mortgage loan for your central Florida home! Contact us today at 407-308-2963 or request service.