Are you looking to buy a primary residence with a low mortgage rate? If yes, then you are in the right place. Get answers to 2 of the most frequently asked questions by first-time homebuyers regarding mortgages. We will clear up what mortgage rate an individual can get with a certain credit score. Typically, interest rates tend to be higher than what is stated in standard advertisements. Let’s take a peek at what mortgage rates are and how they are, based on your credit score.
What are mortgage rates?
Before we get to the rates, let’s understand what a mortgage is. It is a legal agreement by which mortgage lenders provide loans at interest for titles of the debtor’s property. However, after full payment of the debt, the title is rendered void. Like any other loan, interest is mandatory. This interest rate is known as mortgage rate. It is simply the cost you will pay each year to borrow the money to purchase your home. One big factor to determine your mortgage rate is your credit score.
Mortgage rates and credit scores
Keep in mind the the idea that the higher your score, the lower your interest rates. This means that, if you want to enjoy low rates, you should strive to hit bigger credit scores. You can enroll to start receiving free credit score reports directly from Fair, Isaac and Company (FICO) – Enroll Here. Here, consumers are graded on a 300 to 850 point range. A score of 800 is regarded as excellent, 799 to 750 is regarded as very good, 740 to 680 as good, 679 to 640 as fair and 639 to 580 as below average to poor.
So, how do these scores impact your mortgage rate? According to FICO, a high credit score of 800 will have an interest rate of 4.17% with a payment of $975 monthly. On the other hand, a low credit score of 600 will have an interest rate of 5.21% with a monthly payment of $1,000. Clearly, if you want to enjoy good interests on your mortgage is best to strive and attain a credit score of at least 700.
At the end of the day, you still need a place to live. Begin the mortgage application online, learn about how much you can afford and what your monthly payments will be like. We have amazing tools like “Rapid ReScore” to understand the right actions to try to improve your credit score. Utilize the power of credit scores and you will never feel the pinch of high interests.