March 30th, 2018 9:26 AM by Mike Herborn
There are many reasons having higher credit scores will help you in the home-buying process. If you are looking to do a Conventional Loan, it will be important to have good scores. FHA/VA Loans are much more forgiving to lower scores and financing will still be available to you. Here are some of the less known ways your credit scores can affect your mortgage payment:
Interest Rates
Having higher credit scores can substantially change what your interest rate may be. If your credit scores are lower it may indicate more of a risk to the lender and raise your interest rate. A lower interest rate is still obtainable but would be at a cost that may not even be recaptured depending on how long you plan to own your home.
Mortgage Insurance
Usually when you have lower credit scores, your mortgage insurance premium will be higher in turn raising your total monthly payment. The difference in premiums from one credit score range to another can be significant. In fact, it can amount to tens of thousands of dollars over the life of your loan.
Homeowners Insurance
Having bad credit can even affect your homeowners insurance. Insurance companies will review your credit to help predict losses by determining if you are a risky customer and if you are more likely to file claims. If you have lower scores, this may affect your annual premium, raising your total monthly payment.
If you are looking to purchase or refinance and you have lower credit scores, it will be beneficial for you to work on raising your scores. You may still be able to obtain a mortgage with less than perfect credit by going either FHA or VA. But if you are looking to do Conventional you will end up saving money if you raise your scores. If you have questions about how your credit scores will affect your mortgage or would like to know ways to help raise your scores, give us a call at 541-683-3300.