You hear it every day. How important your credit score is.
And it appears the warnings are very accurate, given the fact that nearly half (46%) of mortgages originated in the first quarter went to borrowers with credit scores above 750, per the Mortgage Bankers Association’s Performance Report for the first quarter of 2011.
To put it into perspective, a 750 credit score is just 100 points shy of credit score perfection, which is 850 in Fico’s credit score range.
The lowest credit score possible is 300, while the minimum credit score to get an FHA loan is now 500.
Roughly 27 percent of the population has a credit score between 750-799, while another 13 percent have 800+ credit scores.
But the average credit score is much lower, so clearly there are a ton of prospective borrowers out there getting denied mortgage financing based on credit score alone.
[What credit score do I need to get a mortgage?]
That’s evidenced by the fact that only nine percent of home loans originated in the first quarter went to borrowers with Fico scores below 650.
I suppose you could argue that credit scores and financial responsibility go hand-in-hand, so those with high credit scores tend to have more money in the bank and perhaps a better job, which will also help lender approval.
[What do mortgage lenders look for?]
To sum it up, this illustrates once again just how important it is to stay on top of your credit scores (there are 3) long before applying for a mortgage (purchase or refinance).
Even if you are approved, lower credit scores equal higher mortgage rates, meaning not being prepared could cost you big!
If you’re currently in the market to buy a home or refinance, and your credit score isn’t quite up to snuff, it’s not too late. You can take steps immediately to boost your score, especially if you know what’s holding you down.
If you’re not a self-proclaimed expert, consider speaking with a professional who can get you back on track sooner rather than later.
Read more: What mortgage rate can I get with my credit score?