When buying a home, the interest rate of your mortgage will affect the total amount you will pay for your home throughout the life of the loan. Your credit score directly impacts mortgage rate pricing, and if you have a higher credit score, you will be able to qualify for better interest rates. If you are interested in buying a home and have questions about your credit score and how it will impact your mortgage rates in Jacksonville, Florida, North Star Mortgage, Inc. is here to help. Read on to learn about how your credit score can affect getting a mortgage.
How Does Your Credit Score Affect Getting a Mortgage?
When you purchase a home, your credit score will affect several factors, including the amount of money you will be able to borrow, the type of mortgage you qualify for, and the amount of private mortgage insurance you will have to pay. In order to protect themselves from loss, mortgage lenders will increase the cost of a mortgage for each risk that is attached to a borrower’s credit profile. Therefore, the lower your credit is, the higher your mortgage interest rate will be, resulting in you paying more money over time. On the other hand, the higher your credit is, you can qualify for a lower interest rate because that demonstrates that you are more likely to pay the loan back.
How Are Credit Scores Calculated?
Your credit report is compiled by credit reporting companies and your score is calculated using the FICO scoring model. Your credit report evaluates your payment history with borrowed money and factors in your credit card balances, the length of your credit history, and the overall amount of debt that you owe. Credit scores range between 300 to 850 and a score of 670 or higher is typically considered a good credit score.
Improve Your Credit Score For a Better Rate
By taking steps to improve your credit score, you can make a significant difference to the amount you have to spend when buying a home. Some suggestions to help you boost your current credit score include:
- Paying down current credit debts, beginning by paying off debts that have the highest interest rates first.
- Reviewing your credit score carefully and monitoring for any errors or fraudulent charges that may affect your score.
- Keeping older accounts open, even if they are already paid off, in order to increase your credit limit because having higher credit limits will increase your credit score.
Improving your credit score will decrease the overall price you will need to pay when you become a homeowner. If you are planning on purchasing a home in Jacksonville, Florida, contact North Star Mortgage Network, Inc. today for a consultation.