When you are applying for a mortgage loan, a professional loan officer will consider a variety of factors during the approval process. While things like income and other critical financial information, none will be quite as important as your credit score.
Credit scores are going to range from 300 to 800 points, regardless of the credit reporting bureau, and they are impacted by your payment history, outstanding debt balances and several additional items.
Also included in this score include how many new lines of credit you have, forms of credit and how long you have had your oldest account for. Of course, 65% of that number does come from how you’ve paid on your accounts and the amount of debts that you currently owe.
As a loan officer goes over this information, they are looking for a fairly good rating to qualify for you a decent loan. Typically, a middle range loan will require a score of 660 and professionals can get you into a loan that will be acceptable for most people. If you exceed 759 points on your credit score, the rates would be prime as more lenders would be comfortable loaning you money.
In these cases, the final amount of the loan would depend on the type of mortgage you are interested in. They would be either an adjustable rate or fixed rate mortgage. A fixed rate will traditionally be a 30 year conventional mortgage that maintains a single percentage rate. This number will not adjust and for a loan officer, the financial documents are pretty straight forward. The benefit is that you never have to guess what your total monthly payment is.
An adjustable rate mortgage in turn will have a different calculation. You will find that for this, Home Loan Specialists will have stipulations in the contract that include the lender’s boundary which is often.5% and it will be attached to the Treasury rate. For example, if the LIBOR is currently at 4% and the lenders boundary of.5% is added on and your loan’s rate is going to be 4.5%. While the flexible rates will increase and decrease during the course of the loan, they could potentially save you money.
When asked the minimum credit score a person needs to obtain a mortgage loan without putting down 10% of the loan total, Mortgage Brokers state, “With a score of 580, you can still get a loan. However, you’ll be seeing percentage rates of at least 4%. Those percentages can go down with a 10% down payment. But, cleaning up your credit and boosting your credit score is really the best thing you can do.”
By Maria Carey