Colorado Home Team LLC
Paul Olthoff, Colorado Home Team LLCPhone: (303) 521-7223
Email: [email protected]

Know Your Credit Score When Mortgage Shopping

by Paul Olthoff 04/14/2021

If you're planning to purchase a home in the near future, one thing's for sure: You've got your work cut out for you! However, when you finally find the house of your dreams, the time and effort will be more than worth it!

Your to-do list will include calculating how much you can afford to spend on a house, obtaining a pre-qualification letter from a mortgage lender, and eventually comparing loan estimates.

One of the first things home buyers usually need to do before getting too caught up in their real estate search is to check their credit score. Your credit report, which is basically a detailed profile of your credit history, plays a major role in your ability to get approved for a mortgage and obtain favorable interest rates. Consumers are entitled to get a free copy of their credit report once a year from the three major credit reporting companies: Equifax, Experian, and TransUnion.

Before applying for a mortgage, it's highly recommended that you check the accuracy of your credit report. If it contains mistakes, inaccuracies, or obsolete information, that could affect your ability to get a mortgage -- or obtain favorable interest rates and terms. Fortunately, errors can be disputed and corrected by the appropriate credit reporting company.

The Impact of Your Credit Score

The most widely used scoring system to determine a borrower's ability (and willingness) to stay current on loan payments is called a "FICO score." Depending on your credit history and bill paying habits, your FICO score can range from a low of 300 to a high of 850. If you're wondering how your FICO score stacks up against other homebuyers and consumers in the U.S., the median FICO score was recently in the neighborhood of 721 (although that number fluctuates). That means 50% of borrowers are above that score and 50% fall below that mark.

According to the Consumer Financial Protection Bureau, the best mortgage interest rates are generally offered to borrowers who have earned FICO scores in the mid- to high 700s. If your credit score falls between the high 600s and the low 700s, the interest rates available to you may be somewhat higher.

Those who are saddled with a credit rating below the mid 600s may have difficulty getting approved for a mortgage. If you're in that situation, your real estate agent or loan officer may suggest applying for an FHA loan rather that a conventional loan. Although FHA loans can be more expensive, the standards for getting approved are more lenient. These government regulated and insured loans also allow for a more affordable down payment of as little as 3.5 percent, as oppose to the "typical" down payment of between 10 and 15 percent.

About the Author
Author

Paul Olthoff

About Paul Olthoff, BS, GRI, MCP, SFR, CMRS

We want to turn a everyday real estate transaction into a personal experience where everyone feels like family. We make it our mission to get to know our clients, their needs and provide top notch service. I started investing in real estate when I was 18 in high school with my dad and have enjoyed it ever since.

We as a team have over 30 years of real estate business experience in the following specialized areas:

* Buyers
* Sellers
* Investors
* Property Management
* Foreclosure Solutions
* New Home Construction
* Refinancing Low Rates
* New Loan Discounts

Also I am a Colorado native, Veteran and have enjoyed living here most of my life. As a native, I have been Colorado grow and change, observe trends and gain an understanding of Colorado's problems. I have a clear view of Colorado's future and what it can mean to you. 

So when you decide that you would like to buy, sell or invest, please call/text Paul, he is one of the best, at 303-521-7223 today!