One of the many reasons why you should take care of your credit score is that it is the most influential deciding factors in getting a mortgage approved and getting a lower interest rate.
Strong credit scores are critical for everything from renting an apartment to buying or lease a car, to securing even MORE credit.
But in no instance is that number and its supporting report more critical than when it comes to locking down a mortgage. The big picture—from payment history to open credit to general creditworthiness—will determine how much and, in some cases, even if you can borrow.
Following the market crash just a few years ago, many lenders tightened up their restrictions on mortgage lending, requiring higher scores and increased asset availability before approving new buyers. Scores below 660 or, in some cases, even 680 can result in higher rates, fees or more sizeable down payment mandates. If your score is hovering around 720 you’ll likely secure a loan with reasonable implications, however, spending time to amend any errors and “clean up” outstanding debts could ultimately save you tens of thousands of dollars down the road. A buyer in New York State looking to secure an $800,000 loan will save nearly $40,000 by boosting their credit score from the 700-759 range to over 760. Shoot for scores in the 750+ range to lock in the best deal from virtually any lender.
Another trick? Stop applying for credit cards, loans or other lines of credit one year before you plan to apply for a mortgage. Once you’ve successfully closed on your home you can kick start any additional credit needs but, during that critical period you don’t need any other score detractors.
Need to secure the funding now, and don’t have time to make score amends? Look to an FHA mortgage. Borrowers with credit scores as low as 500 may still qualify. The drawback? Financing is available for a maximum of $625,500 in the tri-state area—even less in some counties—and typically comes with higher fees than a traditional loan.