Long story short, mortgages are more difficult to come by now than they were just a year ago. You probably knew that. What you might not have known is that lenders are relying more and more on your credit scores to make decisions about interest rates, down payment requirements, and income and asset verification.
Just as an example, a person with a credit score of 695 might get an interest rate of 6.75%. A similar person with the identical down payment, job history, and loan amount as person number 1, but with a credit score of 702, would get an interest rate of 6.25%. Just for having a credit score higher than 700, the second person will have an interest rate a full .5% lower than person number 1. In terms of monthly payment, that's a savings of more than $100 a month on a $250,000 loan.
What's that? You're not in the market for a home right now? Perfect! Now is the best time to work on improving your score. After all, you never know when you might want to buy a new car, refinance your current loan, or take out a home equity line of credit to help pay for some unexpected bills.
Since there are many, many websites and companies dedicated to helping you improve your credit score, we'll skip that discussion. Instead, we'll leave you with this advice: Check you credit score and check it often. Gain an understanding of how the score is calculated and how you can improve yours. Make it your goal to get above 700 (above 740 is even better).
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