A mortgage pre-approval will give you a clearer picture of your purchasing budget, and a mortgage pre-approval letter will give you greater bargaining power in the eyes of sellers. Quintessential Mortgage Group can help you with the pre–approval process so you can shop smarter for your next home.
While many factors come into play when you are looking to qualify for a mortgage to buy a home, your credit score is one of the most important. Lenders are much more likely to approve your loan request if you have a great credit score and a healthy income. They will likely offer you more favorable terms, such as a better interest rate.
Qualifying for a lower mortgage interest rate can save you tens of thousands of dollars over the life of your loan. However, before you can start working toward improving your score, you must first know what credit score is needed for a mortgage loan.
Pre-approval and pre-qualification are both ways of determining your purchase budget. And while some lenders use the terms interchangeably, they are not the same. During pre-qualification, you’ll simply provide an overview of your income, monthly debts, and other financial information, and you’ll receive a rough estimate of your maximum loan amount.
Your mortgage lender will not check your credit report during pre-qualification. This makes the process much less accurate than pre-approval. However, pre-qualification has its advantages. Pre-qualification can give you a general idea of your price range, which can help you start the process of looking for a home.
Some loans like a conventional loan might require a credit score of minimum 620, while other type of mortgage loans such as a VA or FHA loan might accept credit scores of 500 or higher.
Lenders are much more likely to approve your loan request if you have a great credit score and a healthy income. They will likely offer you more favorable terms, such as a better interest rate. Qualifying for a lower interest rate can save you tens of thousands of dollars over the life of your loan.
However, before you can start working toward improving your score, you must first know what credit score is needed for a home loan.
Many different factors influence your credit score, including:
If you want to improve your credit score to buy a home, then you should:
Late payments hurt more than almost anything else. Even one 30-day late can knock your score down for months. Set up autopay for at least the minimum on all accounts so you never miss a due date.
Your score improves when you use less of your available credit. Try to keep each card below 30 percent of its limit, and ideally closer to 10 percent if you can. You don’t have to pay cards to zero, just consistently lower the balances.
Older accounts help your score because they lengthen your credit history. If you close them, you can shorten your history and reduce your available credit, both of which can hurt your score.
New credit pulls and new accounts can temporarily drop your score. If you’re planning to buy, pause on store cards, car loans, or financing offers until after your mortgage closes.
Check your report at AnnualCreditReport.com. If something is wrong, dispute it in writing with the credit bureau. Correcting mistakes can give your score a real boost.
