How does a credit score impact mortgage terms?

On Behalf of | Sep 27, 2019 | Uncategorized |

There are a number of important reasons why you should check your credit report. In addition to making sure your credit report is accurate and that you are not the victim of identity theft, you might be planning on purchasing your first home in Milwaukee. Making sure your credit score is in the best shape possible is important because you might end up saving money down the road as a result.

Forbes explains that banks take many factors into account when they grant a mortgage loan, but a credit score may be among the most important, even more than how much money you currently have in the bank. A high credit score indicates you pay your bills frequently and are not a serious credit risk. Banks value this information as it provides a picture of whether you are likely to pay off a mortgage loan and how well you will do it.

The better the credit score, the better chance a person has to receive favorable mortgage terms. Even settling for a merely good credit score may cost you more money than if your score is deemed excellent. For instance, a score in the range of 680 to 699 could cause you to pay as much as $20,000 more in interest on a mortgage of $244,000. Higher scores such as those above 760 are more likely to convince banks to give you a lower interest rate.

In addition, higher credit scores can also result in paying a smaller amount of principal in the early period of the loan. A homebuyer with a high score can pay less and devote more existing payment to the principal than someone with a lower credit score. As a result, a homebuyer can build up home equity as a faster rate and at a reduced cost than someone with a lower credit score.

The benefits of a high credit score make it worth it to investigate your credit report. You might also uncover problems with your report that might plague you throughout your mortgage loan if they are not dealt with, such as inaccurate information that hampers your credit score. People may have different issues regarding their credit report, so do not read this informational article as a substitute for the advice of a legal attorney.