When you apply for a mortgage loan, the lender will take a lot of different factors into consideration when determining whether to approve your loan or not. These factors will also determine what type of interest rate you qualify for. If you want to get the best rate on your loan, you may want to spend some time focusing on these three aspects of your credit before you apply for a loan.
Your credit score
While you may be able to find a lender that will give you a loan no matter how low your credit score is, you will always have more options with mortgage loans if you have high credit. Your credit score will typically determine what the interest rate on your loan will be, and high credit scores typically result in the lowest interest rates available.
Lenders use their own criterion to determine what interest rates to offer, but typically the best rates are given to people that have a credit score of 780 or higher. A score of 780 is usually considered excellent credit, while a score of 700 may be considered good credit. Any score that is under 620 is typically categorized as poor credit.
Before you begin looking for a loan, look up your credit score to find out where it falls. If it is less than 780, you may want to try to improve it before you apply for a loan.
Waiting for an old public record to fall off
If you view your credit report, you might not find a lot you can do to improve your score; however, time will often help. For example, if you have a public record on your credit report that will be falling off soon, you may want to wait until it falls off before getting a loan. A public record is considered a derogatory item on a credit report, and these types of records will bring your score down. Public records can include numerous items, including bankruptcy filings and old tax liens.
Your credit utilization rate
Finally, you may want to examine your credit utilization rate before getting a loan. Credit utilization refers to the percentage of money owed compared to the total amount of available credit lines. This rate can harm your credit score if it is over 30%. For example, if you have $50,000 total in credit lines on your credit cards, you will want to make sure you owe less than $15,000 in all on the credit cards. This would keep your credit utilization rate under 30%. If you owe more than this, you may want to try paying some of your debts off to get the rate under this percentage.
Your credit plays a huge role in the mortgage loan you will qualify for. To learn more about mortgages, contact a lender in your city, like MCS Bank.Share