Why Credit Matters
How To Lower Home Loan Bills: Table of Contents
Understand Your Credit And Lower Home Mortgage Bills
Home mortgage lenders will probe every page of your financial history when they go over your home loan application.
They primarily focus on your credit report, which outlines your debt history and other financial information.
Your credit report will give you a credit score: a number that rates how good you are at paying people back.
This number typically ranges from 300 (bad) to 900 (uber spectacular!) with most people falling in the 600 – 700 range.
Your credit score is determined by the following:
Your past delinquency: If you have failed to make payments in the past the assumption is you will fail to make payments in the future. Recent delinquencies are considered more seriously than past ones.
Your length of credit: The longer you have had credit, the better.
Your credit use: If your credit limits are brimming you will be viewed as risky, even if you make all your payments on time.
Your credit mix: If you have a combination of revolving and installment debt you are considered less risky than someone with only a secured credit card.
The better your credit score the more leverage you have to negotiate good home mortgage terms with your lender.
Leveraging Your Credit Report To Get A Low Interest Rate
An estimated four out of five credit reports contain errors. So check out your report and clean up the mess.
Get copies of your credit report from the big three reporting agencies: TransUnion, Equifax and Experian. Go over each report and look for differences and or anomalies.
If your report has some late payments on it be prepared to explain what happened. Home mortgage lenders are human and can be persuaded or sympathetic just like anyone else.
If you have any outstanding bills pay them off! Every day you wait increases your rate and decreases your potential home loan amount.
The longer you can demonstrate timely payment habits the better your credit score becomes. It is never too early to start building your credit.
If You Have Poor Credit
Start improving your credit score (by making payments on time!) at least 6 months before you apply for a home loan.
If you don’t want to wait six months you can still take measures to create the effects of good credit… but it will cost you.
If you have extra cash to burn then paying a sizable down payment will influence home mortgage lenders to ignore credit blemishes.
If you have a little extra cash but not enough to splurge on a huge down payment then you can reduce your interest rate slightly by purchasing discount points.
Continue: Discount Points Reduce Your Rate