How Credit Scores Affect Home Loans
Having good credit has a lot of benefits.
One of them is the rate you’ll get on a home loan. The truth is that the interest on a home loan can cost you tens to hundreds of thousands of dollars over the life of the loan.
However, a “good” score can shave off tens of thousands in interest payments. And an “excellent” score can save you even more.
The question is how high does your score have to be to get a great home loan?
A good credit score can make a lot of things more affordable. Not only will you likely get a lower credit card interest rate, but a positive credit check when you buy a car or apply for credit can lead to a better rate and much lower monthly payments.
This is especially true for home buyers with excellent credit scores, including married couples where one spouse has a poor or good credit score, and the other has an excellent credit score. -
Leah Manderson, a financial planner in Atlanta, GA, bought a house with her husband last year and got a home mortgage loan that was half of a percentage point lower because her husband has an “excellent” credit score and she has a “good” score, Manderson says. His score got them a rate of 3.25%, while hers brought the interest rate up to 3.75%.
They were able to afford the house on just his financials, she says, and they saved $30,000 in interest over the life of the loan. - See more at: http://www.thecreditsolutionprogram.com/how-credit-scores-affect-home-loans?
600 Credit Score a 'loan killer'
While a low credit score under 600 is a “loan killer,” even a score of 700 or better isn’t a slam dunk for a home loan at a great rate, says Gloria Shulman, owner of Centek Capital Group in Beverly Hills, Calif. - See more at: http://www.thecreditsolutionprogram.com/how-credit-scores-affect-home-loans?
“Banks are equally as strict with income as they are with credit, and a strong W-2 will ideally position a borrower for the lowest available rate,” Shulman says.
How important is meeting both the credit and income requirements? The difference in the monthly payment for a $429,000 loan between the highest and lowest scores is easily more than $300, which over a 30-year fixed mortgage can add up to more than $100,000, she says. -
Interest rates can vary as much as 1.5% for credit scores between 650 and 700, she says. - See more at: http://www.thecreditsolutionprogram.com/how-credit-scores-affect-home-loans?
740 is the new 680
Lenders give better interest rates to people with high credit scores because they’re more likely to make payments on time.
But having a score over 740 doesn’t mean you’ll get a lower interest rate than advertised, says Gregory Meyer, community relations manager at Meriwest Credit Union in San Jose, Calif. “It just means you are more likely to be granted a loan with the advertised lowest rate,” Meyer says.
How to Improve Your Credit Score