You’ve been doing your homework about your potential lender and researching their traits to make you trust them better. You checked their credentials and found them out to be dependable and trustworthy and finally decided to close a contract with them. However, acquiring a mortgage loan requires another requisite: credit score. Your credit score is the definitive factor your lender will use as leverage in deciding whether or not to allow you to borrow.
This short article will help you identify credit scores acceptable for a mortgage loan. Moreover, you’ll also discover different loan packages to help you expedite your mortgage application faster. It’s expected that by the end of this quick read, you’ll know how credit scores affect your mortgage loan amount and what things to do to improve your credit marks.
Who Can Apply for a Mortgage Loan?
One of the most frequently asked questions is, “Can I apply for a mortgage?” The answer is, “Yes! You can.” However, you have to understand there are borrower qualifications you need to satisfy initially like liquidity and credit score rank. Between these two, the latter plays a more significant part in your mortgage loan application. Your ability to pay your mortgages on time depends solely on your credit standing.
Make no mistake in jumping the gun to get a mortgage loan. It pays to prepare beforehand because any hiccups on your behalf mean disqualification from your lender even if they offer easy mortgages for bad credit loan package.
Mortgage Credit Scores Table
The following are credit scores your lenders are expecting you to have while processing your mortgage application. Be sure to properly comprehend this list to make you stand out from other borrowers:
SCORE MEANING 579 and lower a mortgage score this low
means you’ll get an interest rate
that’s 2% higher than the lowest
current offered rate
580 – 619 getting this score means you’ll
receive an interest rate that’s
1% higher than the lowest current
620 – 679 this score guarantees you’ll receive
an interest rate that’s 0.5% higher
than someone with outstanding
credit score will get
680 – 739 this is the average credit score most
borrowers have and won’t have any
significant effect on your interest rate
740 and higher a credit score this high immediately
allows you to receive the best interest
rate your lenders or mortgage companies
As you can see, your credit scores dictate what interest rates your lender or mortgage company will give you. This is important to learn because your plans to buy a house will be greatly affected if your credit standing falls below the average borrowers’ scores (680 – 739 points).
If you are a first-time homebuyer, make certain about your credit standing since this can impact your loan application. Contact your nearest credit bureau for a more in-depth credit score report most especially if you’re aiming to strike a deal regarding financing for bad credit home loans to make your monthly payments easier to cope with.
Available Mortgage Types
It’s not enough for you to gain knowledge about your credit score. You also have to familiarize yourself with different mortgage loan types or plans to maximize your borrowing limit through your credit standing.
The following list serves as your guide in choosing what type of mortgage loan to apply for:
LOAN TYPE REQUIRED CR SCORE FHA Loan 580 USDA Loan 620 VA Loan 580 203k Loan 640 Conventional Loan 620 Conventional 97 Loan 680 HomeReady / Home Possible Loan 620 Piggyback Loan 640 Jumbo Loan 680
As you can see from the above listing, your credit score is needed to confirm what type of mortgage loan applies to your needs. This is most useful to first-time homebuyers because this will serve as their guide in improving their negative credit rating. Likewise, lenders will have confidence in you as a borrower since you’re not considered a financial risk by getting a mortgage with a low credit score from them.
It’s not always gloomy for borrowers to become anxious when applying for a mortgage loan most especially if you are a first-time homebuyer or home builder. There are compensatory items that lenders also look into to allow you to secure a loan without being tagged as risky.
These are as follows:
• Limited payment scheme
• 5 years or more of employment either with the same employer
or within the same industry
• High-income earner
• Sufficient to large amounts of bank savings
• 20% initial down payment
• Debt-to-income ratio is lower than 36%
• Constant or fixed source of income
• Limited liabilities
Knowing your credit score requirements is one of many steps you’ll take before applying for any mortgage loan. Having a good credit rating increases your credibility to lenders making you a no-risk borrower. There are different types of mortgage loans to choose from depending on your current credit score outcome. If you’re worried that falling below the required credit mark will discourage you from borrowing, don’t fret. Compensatory factors are also considered by lenders to make it easier for you to obtain the loan you need.
Dominion Lending Oshawa is your best mortgage solutions provider in Canada. Founded by Faizal Garasia in 2019, we have a network of more than 90 lenders including the largest banks, credit unions, trust firms, and financial institutions across the country.
Contact us at (416) 825 0142 or send an email to [email protected] today to learn more.