Great Credit Scores and Mortgages

Credit Score Basics

Your credit score is a basic financial gauge that a mortgage lender will use to determine if you get a loan or not.

First they will utilize it as a cut-off to see if you even qualify for a certain mortgage program. The same lender might have many different types of mortgages available. Generally each of the different loan programs has its own underwriting criteria.

Credit score minimums are typically set for each of the lender's programs.

The second way a mortgage lender will use your credit score is to “price” your loan.

This means deciding what interest rate you are eligible for.

Your credit score is one of several factors that go into calculating what your interest rate will be, but it is very important.

Frequently mortgage lenders will have a top down approach to credit score grading. If your credit score falls between 719-700 you may be offered one rate and another rate if your score is between 680-699. This continues all the way down to the minimum credit score. The credit score utilized here is the “mid score” which is the middle credit score on your credit report. You generally have three different credit scores but the one most lenders use for lending purposes is your “mid score”.

The Best Deals

There are a number of mortgage lenders who focus on working with people who possess great credit. This is the sort of lender you want to work with.

These types of lenders will regularly include additional incentives for borrowers with excellent credit. Case in point, they may lower your interest rate by 0.25% if your credit score is over 720.

There are a lot of lenders who concentrate on borrowers with bad credit. They generally don’t have good loan programs for borrowers with excellent credit. They might be able to offer you a loan, but it is doubtful it will be as good as an offer from a lender that usually works with high credit borrowers.

Some large lenders work with borrowers of all credit types.