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What Does Your Credit Score Say About You?
by Robin Root, Broker Associate & Branch Manager, Platinum Mortgage
Lenders have been using a credit scoring system to qualify potential home buyers for new home mortgages for years. The scoring system affects how much home you can afford, what your interest rate will be, how much money you will need to put down and other specific terms of your new loan. How does your credit score affect your buying power? Read on to find out…
What's your score?
Most lenders require a credit report from the three major credit bureaus— Equifax, Experian, and TransUnion— and use the middle score. Credit scores range from the low 800’s to the high 300’s, and most of the population falls somewhere in the middle of the spectrum. To qualify for a Conventional loan you must have a middle score of 620. FHA, VA and SUBPRIME lenders will loan below this 620 middle score requirement.
720 or higher
Borrowers with middle scores of 720 or greater can expect to receive the best loan programs and rates available. This includes but is not limited to the best rates for Stated Income and Limited Documentation loans, all Conventional and Jumbo products, and 100% and higher financing programs. Buyers with stellar credit may also benefit from less paperwork at close, as well as quick approvals and closes.
680 - 700
This range is considered above average credit. Many lenders will offer Stated Income financing to borrowers, but they may increase the rate or fees. All of the Conventional and Jumbo programs are available to buyers in this credit score range with little to no additional fees. Many 100% and greater financing options are also available to home buyers in this range.
The majority of borrowers fall into this category. You may have never had a late payment in your life, yet still have a score falling in this range due to the various factors used to determine the scores. These are considered good scores and can be used to obtain Conventional loans. There may be adds to the rate or fees for higher loan to value programs. This is a great category to be in and there are many programs offered to fit most mortgage needs.
619 – 580
These borrowers typically cannot obtain Conventional financing. A buyer falling in this range can obtain FHA, VA, or Non-Conventional—also referred to as Sub Prime—financing. With these loans, your credit score directly affects how much money you'll be required to put down and what your interest rate will be. Borrowers can purchase with 100% financing but will pay higher interest rates on their mortgage. Many loan programs for this credit score category are fixed for two to five years and then convert to adjustable rate mortgages to give the buyer time to repair the credit and apply for a better rate. Some lenders will allow two years or older collections to remain outstanding and offer other credit breaks.
When it comes time to shop for your new mortgage do not allow multiple lenders to pull your credit report. If you already have a copy of your credit report, you can give the lender your scores. This will enable them to provide an interest rate quote without pulling your credit. With each inquiry your credit score will decrease.
In fact, it is possible to drop your score 50-100 points due to credit inquiries. This is common when borrowers are looking at new cars or applying for new credit cards. If you are thinking about purchasing a home, hold off on any new purchases or new accounts, since they can decrease your credit score and may cause you to pay a higher interest rate on your mortgage. Make your purchases after you are in your new home.
Once you have decided upon a lender, allow them to pull your credit to get you pre-qualified and credit approved. This will take the worry out of qualifying for a new mortgage and give you peace of mind knowing you have the best mortgage program for your credit needs.
Robin Root, broker associate and branch manager of Platinum Mortgage, has over 15 years experience in residential mortgage loans and is a Real Estate Broker, California Department of Real Estate license #01103509. Platinum Mortgage offers a wide variety of loan programs and services including: Conventional, Jumbo, Interest Only, Stated Income, No Doc, 100% LTV, Zero Down programs, 2nd & HELOC’s, and much more. Contact Robin at (888) 399-5577 or via email at firstname.lastname@example.org. www.RobinRootLoans.com