Credit Score is the most important thing when we talk about mortgage rate. This number is monitored by credit bureaus and the major ones are Equifax, Trans Union, and Experian.
What is the way to determine your credit score? There are numerous factors that are collectively responsible to create your credit score. However, some of the major factors are used are: the amount of credit you have, your payment history and your type of credit. Your credit score comes between 350 to 900 and the lower is the number the worst is your score and this is the signal to the lenders that you are much more of a lending risk. If you have a lower score and lenders finds it riskier to lend money to you, then your mortgage rate will be pretty higher than compared to someone who has a higher credit score. If you have a higher score, you will be given a much lower mortgage interest rate.
People with credit scores between 760 to 900 often get the best mortgage rates and it is easier for them to get a purchase mortgage. If your credit score is lower than 620, you come under “subprime category” and you will have to obtain special mortgages as traditional ones will be very difficult to get, if at all.
And the one who has credit score 500 or less than this will find it difficult to get a mortgage. However, people under credit score 500 can get a mortgage through a “hard money” lender. These hard money lenders can give the mortgage no matter what credit score you have but you will have to place at least 50 percent cash down for the purchase.