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The Importance of Credit Score in a Mortgage Loan

By Richelle Jelsma Subscribe to RSS | February 29th 2012 | Views:

Taking out a mortgage can be rather intimidating. This is especially true if you happen to have a bad credit score. Most people who have bad credit don’t even bother taking out a mortgage.

Why Credit Score Matters

When it comes to taking out a mortgage, loan your credit score is one of the most important factors in determining how much you can borrow. A credit score can determine whether you will be getting the ideal home or if you end up in a trailer park.

Any good lender will look at your credit score in order to determine how you can pay back your loans. Some of the things that lenders will be looking for include things such as late payments. A bad credit can greatly affect your qualifying Debt-to-Income (DTI) ratio in mortgage programs. It has been said that credit scores below a 620 Fico can lessen the maximum DTI to below a .50.

How do you solve a problem like bad credit?

While having bad credit is certainly a hindrance when it comes to getting that dream mortgage Salt Lake real estate companies offer, it is certainly not impossible. One of the things you can do is to get someone who has a good credit score—or at the very least better than yours—as a cosigner to reassure lenders that they will be able to get their money back. However, you still have to pay back the entire amount, since you don’t want to get your cosigner into trouble.

Another thing you can do in order to remedy your bad credit score problem is to get a Federal Housing Assistance. An FHA loan is a type of federal assistance that provides housing loans for people with lower income. Most people with poor credit score would opt for this type of loan, but the DTI rarely goes above.43. This means you won’t exactly get the best mortgage Salt Lake City UT has.

If your credit score is not that great, you can try to raise your credit score before even applying for a Salt Lake City mortgage. Keep in mind that any bad credit will be on the record for at least seven years, so try to remedy the situation. You can consult a financial advisor or even get a new line of credit in order to improve your report. The higher your credit score the more likely it is to have a lower interest rates (which means lower monthly payments).

Richelle Jelsma - About Author:
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