Q: I am looking to buy a house, but I do not know what my credit report looks like. How does my credit score affect the terms of my mortgage rate? Thank you for your question. While obtaining a mortgage process can be complicated, there are things you can do to speed up and ensure yourself that you get a decent loan.
The home loan rates are generally determined by a variety of factors, including your credit history. Do you make all your payments on time credit card? Have you missed an auto loan payment? What available credit do you have? These are some of the important things that mortgage lenders will be looking for your credit reports. Fortunately, you can find the answers to these questions for yourself before applying for a loan consultant in your credit history.
How to get your credit report
required by federal law, you are entitled to receive an annual free credit report from AnnualCreditReport.com. While you will be provided with your credit history from the three major credit bureaus - Equifax, Experian and TransUnion - you will not be able to access your credit rating, which is also an important factor in determining your mortgage rate
.If you are looking to get a complete copy of your credit report and score, there is another option for you. Many credit report monitoring services will provide a three-bureau credit report, and all three of your scores after you register for the service. And the best part is that many of them offer free trials, which means that you can get full access to your reports and scores without making a financial commitment.
Once you have a copy of your reports, you should also make sure there are no errors, and if there are, report them immediately to the three credit bureaus, because these errors could affect your potential mortgage rate.
How credit affects your mortgage
In other words, your credit report is an important indicator of whether you are a responsible borrower. Banks are reluctant to lend money to people who tend to pay them on time or in full. And even if you do get approved for a loan with not so great credit history, you will most likely high interest rates, making the purchase of your home more expensive.
In addition to your credit history to help determine if you qualify for the loan, your interest rate will fluctuate depending on your score. For example, someone who has a credit score above 760 can obtain a mortgage $ 500,000 with payments of $ 2,320 / month, while a person with the lowest acceptable credit 620, known as the subprime credit would pay $ 2,793 / month, according to FICO. That's a difference of more than $ 5000 / year that could be put to other uses, such as retirement savings, go on vacation or pay student loan debt. This means that over the life of a 30 year loan, a person with excellent credit can save $ 150,000 more than someone with subprime credit.
Your credit report is just the beginning of your trip to buy a house, but the more knowledge you have of it going into the process, you will be better in the long run .
See how much you could pay for a house using our mortgage calculator.