When it comes to applying for a mortgage loan, your credit score will have a big impact not only on the loan you’re eligible for, but the individual rates of them.
Unless your credit score is below 580, you’ll be eligible for a mortgage variety of some kind, but anything below will be a struggle.
Beyond current credit and obligations, your credit history can affect your loan amounts. Loan-to-value refers to the percentage of a property sale price that you’re able to borrow.
Under certain loan programs, mortgage lenders will limit how high this percentage will go if your credit score falls low. This happens with most non-conforming higher tier loans.
Likewise, you may be prohibited from joining certain loan programs, if your credit history has significant damage. When it comes to underwriting, a worse-off credit history will lead to a harsher underwriting process. Whereas a strong credit history will allow some lenders to look past and trust the history.
Generally speaking, a credit score about 670 will allow you to seek out more lucrative and prime interest rates on your loan. Scores below 620 are considered subprime, leading to higher interest rates.
With a higher credit score, you’ll be eligible for premium loans such as jumbo, conventional and refinance. They all have unique benefits, and tend to be more situational.
With a lower credit score, you’ll be offered less mortgage options. However, even with a credit score as low as 580, you’ll still be able to qualify for an FHA Loan.
An FHA (Federal Housing Administration) loan provides very strong option for both purchases and refinances. The rates are typically lower than a conventional loan, and require as low as 3.5% for down payments.
The debt-to-income ratios are also higher, allowing for up to 57% amounts. If you’re looking for more information on an FHA home loan, then the Home Loan Expert are a company you should contact.
They are a directly endorsed, approved lender by the Department of Housing and Urban Development. 1 in 5 home buyers with them use FHA loans, so they have experience and knowledge within this specialized area.
Quality Of Home Purchase
Of course, a fairer credit history will allow you to look at better homes. If your credit score is 760 or higher, then you’ll qualify for the best interest rates on mortgages.
Even if you have enough budget for a higher down payment, having to pay more interest rates could cripple your long-term financial goals. When it comes to luxury homes, jumbo loans are usually the way to go. You can qualify with high credit scores, low debt obligations and other financial qualities.
These loans start from mortgages over $500,000 and can go all the way up to $2,000,000. As these loans can be more demanding, they usually require a higher outright down payment, so capital cash is important. Be aware that the interest rates for these loans can still be higher, as a standard practice, so make sure your financial situation is secure.