Credit scores are a huge part of the loan pre-approval process. It not only determines your eligibility for home financing but can also determine what rate you will qualify for. Why? Because your credit score is used to determine how risk y of a borrower you are.
Lenders use your median score from the three national credit bureaus, TransUnion, Experian, and Equifax. This number is known as your FICO score and can range from 300 to 850. The lower your score, the higher risk borrower you are.
A minimum of 620 is required by all mortgage loans delivered to Fannie Mae, but individual establishments may have a higher credit score requirement depending on the loan type and program. However, if your scores are below the minimums there is still hope for homeownership. There are several ways to improve your credit score including making on-time payments and keeping balances low on revolving credit lines.
Knowing and understanding your credit score are important components of managing your finances. Any time you apply for financing or a source of credit, your credit report is pulled. Be sure to ask the institution running your credit to give you a copy of your scores for your knowledge.
If you want to know where your credit falls in regards to home financing, contact one of our mortgage bankers. For more information on homebuying, refer to our Mortgage 101 Handbook, a go-to for anyone thinking of buying their first home.