Want to know, “how to buy a home?” Google it!
And soon you’ll realize the role of credit score in approval of your mortgage applications! And here’s the answer to your why….
Would you lend money to a friend, who takes forever to get back to you or maybe never gets back to you? Lenders do feel the same way regarding mortgages. They want to make sure that you’ll pay them back and this is where the CREDIT SCORES comes into play.
Your credit score shows your financial behavior as a borrower- your credit history gives a reassurance to lenders that you’ll repay a huge amount of money on time. But that’s not all- it discusses a lot more when it comes to mortgage.
So, today, we are going to discuss “how your credit score influences your mortgage application in the bustling metropolis of NYC and if you got low scores then where to find the best credit repair company in NYC.
But before that, let’s dive in to know what score is acceptable for mortgage approval!
What Should Be Your Credit Score To Get The Best Mortgage Rate?
A credit score equals to or above 700-plus usually lands you with lower interest rates; whereas the mortgage industry approves certain kinds of loans if you manage to get a score under 680, and offers best interest rates if it is 700 or above! Ultimately, higher the score, lower the interest rates and vice versa.
Usually, creditors set their own standards, but here are the guidelines for an acceptable score.
- Excellent Credit – Score of 740 or higher.
- Good Credit – Scores between 700 and 739.
- Fair Credit– Scores between 630 and 699.
- Poor Credit – Scores of 629 or below.
How to Build Your Credit Score
If your credit score isn’t where you want it to be, don’t worry! There are several credit repair companies that can help you boost your score with time- but following are the most effective methods to boost your score on your own:
- Paying bills on time,
- Reducing credit card balances
- Disputing inaccuracies on your credit report.
Factors Involved in Mortgage Application Approval in NYC
Higher Credit Score
Securing a mortgage with a higher credit score can offer numerous benefits. Apart from lower interest rates, you may have access to a wider range of loan options, potentially saving you money and providing more flexibility in your homeownership goals.
Credit Scores as per Mortgage Types
Different mortgage programs have varying credit score requirements.
For example: conventional loans require a higher credit score compared to Federal Housing Administration (FHA) loans. Thus, it is important for you to know the bare minimum slab for or the type of mortgage you’re applying for!
Lenders not only consider your credit score but also your debt-to-income (DTI) ratio. This ratio compares your monthly debt payments to your gross monthly income. A lower DTI combined with a higher credit score enhances your mortgage application’s strength.
Local NYC Factors
The real estate landscape of NYC has introduced some unique considerations. The high cost of living and property values can influence credit score requirements. Being informed about these local factors can help you better prepare for your mortgage journey.
Avoid the Following Mistakes
When aiming to secure a mortgage in NYC, certain mistakes can hinder your progress. These include opening new credit accounts before applying, neglecting existing debts, and failing to address credit report discrepancies. Awareness of these pitfalls is vital.
Build Credit to Buy a Home
If you’re a first-time homebuyer with limited credit history, there are specific steps you can take to establish a favorable credit profile. Becoming an authorized user on a family member’s credit card or obtaining a secured credit card are strategies worth considering.
Get Credit Counseling Services in NYC
Navigating the credit landscape can be overwhelming. Fortunately, there are credit counseling services available in NYC that can provide guidance on improving your credit score and overall financial health.
Monitor Your Credit Score
Regularly monitoring your credit score is essential, especially during the mortgage application process. Keeping an eye on any fluctuations or changes can help you take proactive steps to maintain or enhance your creditworthiness.
Prepping Your Finances First Is Worth It!
Following the above steps can help you get your loan application approved; however, keep in mind, that increase in even a fraction of percentage can cost you a lot more in home loan payments over the long term. Therefore, it is important to keep track of your finances for buying a new home and improve your score with time to get the benefit of lower interest rates.