Smarter in 60 Mortgage Tips
MORTGAGES | FEBRUARY 08, 2022 | PEOPLES STATE BANK
It’s often said that your credit score can open the door to lower interest rates on home mortgages. That is the truth. The better your credit score is, typically the better interest rate you’ll be able to obtain when seeking out a mortgage. That’s because a lending institution sees someone with a higher credit score as less of a risk.
Many homebuyers want to know what credit score they need to get approved for a mortgage. Here’s another truth. There are many mortgage programs available for people who don’t have a high credit score. Many of those options include government-backed loans.
If you have a lower credit score, you may still qualify for a mortgage. But you might have to pay a higher interest rate. Along with the lower credit score, you’ll likely have to pay for mortgage insurance. The reason for this is the mortgage insurance serves as a buffer in case you were to default on the loan. The mortgage lending company will receive the insurance payout, so they don’t lose out on the loan.
Government-backed loans typically have lower thresholds for the credit score you’ll need to qualify. For example, a Federal Housing Administration (FHA) loan will accept as low as a 580 credit score, while Fannie Mae and Freddie Mac loans will accept a 620 credit score. USDA and VA loans don’t technically have a minimum credit score, though most lenders who approve those loans will want at least a score between 620 and 640.
You’ll save money if you have better credit because of the lower interest rate you receive from being a better borrower. Simply put… loan rates are lower if you’ve got a higher credit score.
At Peoples, our mortgage lenders can help you determine your credit score, and what type of mortgage might be best for your financial situation. You can apply online by selecting a lender or calling 888.929.9902 and ask to speak to a mortgage lender.