With mortgage rates near historic lows, borrowers looking to refinance or purchase a home seem to be increasingly curious about what they’re actually eligible for.
A reader recently asked, “What mortgage rate can I get with my credit score?” So I figured I’d try to clear up a somewhat complicated question.
One thing that determines what mortgage rate you’ll ultimately receive is credit scoring, though it’s just one of many factors, known as mortgage pricing adjustments.
Along with credit scoring is documentation type, property type, loan amount, loan-to-value, and several others.
Credit Score One Piece of the Puzzle
Using credit score alone, it’s impossible to tell a potential borrower what they may qualify for without knowing all the other important pieces of the puzzle.
However, generally speaking, a credit score of 720 or above should land you in the highest bracket, meaning if all other areas of your unique financial profile are in good standing, you will qualify for a mortgage at the lowest possible interest rate.
If you’ve ever seen a mortgage advertisement on TV or the Internet, they assume you’ve got an excellent credit score. This could mean a credit score of 720, 740 or higher. And they use that assumption to produce a favorable mortgage rate. But without that great score, your mortgage rate will be higher.
Borrowers with credit scores of say 680, 660, and 620 will have increasing difficultly securing financing, and will receive higher mortgage rates if a mortgage is ultimately granted.
(How to get a mortgage with a low credit score.)
Unfortunately, I can’t say you’ll get X or Y mortgage rate if you have Z credit score, there are just too many factors all in play at once.
But I can say that credit score is one of the most important factors in determining both the mortgage rate you’ll receive and whether you’ll receive financing to begin with, so it’s recommended that you check your credit score months before applying for a mortgage to see where you stand.
(Get all 3 credit scores free instantly to see where you stand!)
If you don’t know your credit scores long before applying, you won’t have adequate time to make any necessary changes. Trust me, surprises come up all the time when it comes to credit.
An erroneous medical collection could deflate your score, even if it’s reporting in error. And that lower score could boost your mortgage rate a percentage point or more higher.
Disputing errors and/or fixing other credit missteps can take several months, so don’t hesitate to check your credit if you think you’ll be applying for a mortgage in the near future.
Read more: What credit score do I need to get a mortgage?
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