How much does my credit score affect my interest rate?
The interest rate is the amount a lender charges to borrow the principal loan amount. The interest rate is determined by current rates and the borrower’s credit profile.
Lenders use a weighted rating system called a FICO Score. Generally, loans qualify at: Conventional 620+ | FHA 580+ | VA 500+
Lenders will look at your payment history, the amount you owe to creditors, and how long you’ve been using credit. The longer you have a good payment history, the better. Tour outstanding balance to available credit should be less than 50%. Lenders also look at any applications for new credit. So, it is very important to avoid any additional credit inquiries until you are in your new home.
Although it’s up to specific lenders to determine what score borrowers must have to be offered the lowest interest rates, sometimes even the difference of a few points on your credit score can affect your monthly payments substantially. For example, the difference between a 3.5% interest rate and a 4% rate on a $200,000 mortgage is $56 per month. That’s a difference of $20,427 over a 30-year mortgage term.
It is possible to qualify for a mortgage with a low credit score, but you’ll pay higher interest rates. That in turn leads to higher monthly payments. Although, keep in mind, depending on what you are paying in rent, buying a home can still be advantageous for you.
How much do I pay in interest and in closing costs for my loan?
The amount of your debt, your credit score, down payment, all factor into your interest rate and cost for the loan so the amount you will pay in interest can vary. Your Lender is required under Federal Law to provide a Loan Estimate within 3 days of a completed loan application. This Loan Estimate will include your estimated down payment, closing costs and payment information (principle, interest, taxes and insurance). We also would be more than happy to provide you with an estimate on what your closings costs will be. The Graham Team can provide this to you at any time, so even if you are just starting to save up for your perfect home, you will have a good picture as to how much money to be prepared with.
We hope that this information was helpful to you. Do not hesitate to reach out to us with any questions or to discuss if now is a good time for you to buy a home! 702-930-9551.
What else does it require to purchase a home? Check out an overview here.
10X My Home
Ask about our 10X My Home Program where we handle updating and remodel your home, including the upfront costs, which allows your home to in its best presentation and obtaining for your multiple offers to select from. Our program has put an average of $14,400 additional profit in our Sellers pockets. That no chump change!!
Helpful Links:
Categories
Recent Posts
