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Impact of Your Credit Score When Applying for a Mortgage

By Jamie Cooley on September, 16 2019
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Jamie Cooley
Jamie Cooley

Sr Loan Originator
Jamie has 10+ years’ experience in personal finance with nearly 1,000 loans closed! He enjoys helping others succeed & teaching - not only what he’s learned, but what he’s seen through his experience.
Jamie Cooley is a Sr Loan Originator with Fairway Independent Mortgage Corporation
NMLS#1044127

Your credit score is a digital track record of how you've handled your finances, and more specifically, your debt obligations.

A high credit score indicates that you've successfully borrowed money and paid it back as agreed.

Adversely, a lower credit score indicates you've not borrowed money and/or borrowed money, but not successfully paid it back as agreed.

 

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Credit scores provide a systematic way to identify the financial behaviors of consumers - simplifying your unique financial situation into a 3-digit number & placing you on a rating scale to make lending decisions more informed and better predict how you'll handle your loan. Learn more about factors that impact your credit score.

 

What Lenders Look for in a Credit Score

 

When you submit a mortgage application, the lender is looking at your credit score to see how successfully you've borrowed on smaller items, such as a credit card, student loan, or car payment.

If you've paid those debt obligations back on time, there's a high likelihood that you'll pay your mortgage payments on time.

Your credit score also offers insights into your debt-to-income ratio and how well you handle making the payments, essentially providing an understanding on how much you can afford to pay each month for a mortgage.

Your credit score tells mortgage lenders whether it would be risky for them to provide a loan for a new home or not, helps determine how much you can borrow, and impacts your interest rate.

 

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Credit Score Impact on Mortgage Interest Rate

Your credit score is a large factor in determining your interest rate on any debt obligation, especially for a mortgage loan.

A high credit score yields lower risk which is rewarded with a lower interest rate, directly impacting your monthly payment.

 

Credit Score Needed to Obtain a Mortgage Loan

Different lenders have different thresholds for the minimum credit score required to approve a loan and can vary dramatically depending on your complete financial picture.

To get a conventional loan or USDA loan, most lenders typically require around a 620-640 minimum and can vary based on the amount of debt you have. You'll need at least a 580 credit score to qualify for most VA Loan Programs. To qualify for an FHA loan, most lenders require at least a 580 credit score and 3.5% down payment.

Of course, the higher your credit score, the lower your interest rate will be!

Click here to reach out to me for more tips, help with mortgage questions, or to apply online - I'm happy to help!  - Jamie

 

Check out our latest guide, 5 Questions to Ask when Comparing Lenders:

 

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Featured Expert

Jamie Cooley is a Sr Loan Originator with Fairway Independent Mortgage Corporation and has been recognized as a Top 1% Mortgage Originator in America the last 3 years. Jamie is an Omega Builders preferred lender and works closely with our home buyers to ensure a smooth closing from start to finish.

NMLS# 1044127


This article is provided for informational purposes only. Omega does not warrant or guarantee the accuracy of the information provided and makes no representations associated with the use of this information as it is not intended to constitute financial, legal, tax, or mortgage lending advice. Omega Builders encourages you to seek the advice of professionals in making any determination regarding, financial, legal, tax, or mortgage decisions as only an informed professional can appropriately advise you based upon the circumstances unique to your situation.

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