How to Get a Higher Credit Score and Better Mortgage

Posted by Lee and Katherine Keadle on Thursday, September 24th, 2015 at 3:43pm.

cartoon on getting a mortgage

We’ve included below info and tips from the Consumer Financial Protection Bureau that can help you plan for your home purchase:

    • Many Americans don’t realize that Federal laws allow them to get a free credit report check every 12 months from all 3 of the credit reporting companies (Experian, TransUnion, and Equifax). Not only is this a good way to catch identity theft, but it also helps you keep the info on your credit reports accurate and up to date. Correcting mistakes on your credit report can help increase your score in less than 30 days. The authorized, free website to do this is
    • Generally the higher your credit score, the less you’ll pay for a mortgage. If you’re several months out from purchasing a home, it’s not too early to talk with a lender. He or she can help you correct errors on your credit report and make other suggestions to improve your score. Some buyers can save $50 to $100 per month simply by taking steps to improve their credit.
    • Roughly 35% of your credit score comes from your payment history and how frequently you’ve been 30, 60, or 90 plus days late on your bills. Roughly 30% of your score comes from credit utilization and compares your available credit with your current balances (which is why paying down certain debts is one way a lender can recommend to raise your credit score).
    • Always ask whether a prepayment penalty applies to your loan. If your loan has a prepayment penalty, you might have to pay the fee even if you sell your home – not just if you pay off your loan early.
    • If you can make a down payment of 20% or more, you’ll usually get the best rates and options. Making a down payment that is 5-19% of the home’s value is most common because it allows buyers to keep more money in their pocket. However, know that you’ll be required to pay Private Mortgage Insurance (PMI) which can either be paid each month or with a one-time PMI pay down. Ask your lender about the latter option because this can often save a borrower a lot of money over the long term (ex: saving $12,000 on a $300,000 loan). Mortgages with low down payment options (5% or less) typically are the most expensive long term because they generally have higher rates and fees. This option is of course a trade off between keeping more money in pocket (peace of mind) and estimating costs over a 20 or 30 year time frame.

If you’re a few months out from your Charleston real estate purchase and looking for a trusted lender to help improve your credit score, please let us know so that we can recommend one for you! With financing, it’s so important to work with professionals who are reputable and don’t make the mistake of over-promising and under-delivering. For most people, buying a home is the largest single investment they will make, so know that we’re happy to connect you with lenders who can help you make the best financial decisions possible!

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