If you are considering or you are finally ready to purchase a home in Los Feliz, CA, it’s smart to read the below information and make sure that you’re working with an expert Los Feliz Buyer’s Agent.
With all of the revision in the Los Feliz mortgage industry these days, it is more pivotal than ever to have a better understanding of How Your Credit Score Determines Your Mortgage Rate and how a credit score actually work – and how to keep your credit score as high, and the mortgage rate you lock-in, as low as possible.
Our Los Feliz Buyer’s Agents say that a handful of homebuyers don’t realize how how your credit score determines your mortgage rate and how essential it is to clearly understand traditional lenders, those which use Fannie Mae guidelines, are now charging a premium for credit scores that are between 620 (the minimum they will lend on) and 720, part of which is passed on by Fannie Mae itself.
The lower the score, the higher the premium and the rate, with borrowers in the 720+ range getting the best rates available in the market place.
Our Los Feliz Buyer’s Agents say that the FHA is also another option, and has premium for credit scores in that 620-720 range, but their upfront premium for all borrowers is 1.5% of the loan amount plus a monthly mortgage insurance premium. On it’s face the loan may seem like a smart plan of action, however, this can be a bit on the expensive side of things. Additionally, they do happen to have sub-620 score premiums if that’s your current credit situation.
Your credit score consists of several components, each which makes up your total credit score.
For the most part, credit is pulled from the three main credit bureaus (Trans Union, Experian, and Equifax) and lenders use the middle of the three scores to figure out a combined credit score.
The three major factors include:
1) Payment history, which is about 35% of the total scoring.
This indicates how well a borrower is able to pay on time. Recent late payments of any shape or kind, including utility bills, and mortgage late payments weigh the most heavily on a persons credit score and ultimately their payback liability.
2) Level of indebtedness
This is the balance of a credit line versus the total limit, and is about 10% of the score. Ideally you want to carry a balance somewhere between 40% – 30% of the credit line limit.
3) Length of credit history
A clear demonstration of being able to manage credit long-term makes up about 10% of a credit score.