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When you’re applying for a mortgage, your lender will closely examine your credit score and credit history. The higher your score, the more trusting a lender will be that you can handle repaying your mortgage payments and provide you with an interest rate to reflect that trust.
To ensure your finances are in top shape, we’re diving into ways you can prepare your credit for a top-notch interest rate.
Your credit utilization is the measurement of how much of your available credit you’re using divided by the total amount of money loaned to you. Experts suggest that your utilization ratio should be at 30% or lower. If your utilization is any higher, your mortgage lender will think your credit is overextended and you can be a higher default risk than other borrowers.
The longer you have a history of on-time payments and open accounts, the more your score improves. If you close accounts, it reflects on your credit report. It lowers your credit utilization and your overall credit mix will appear to be less sufficient.
According to credit and finance experts, your payment history makes up about 35% of a person’s overall credit rating. Any account that shows up on your credit report counts against your score. This means your credit card accounts, auto loans, personal loans, and student loans should all be paid on time as to not lower your score.
Most likely, you won’t notice any significant changes to your credit right away. Experts suggest it can take at least six months of diligent credit management to make meaningful progress.
Building a habit can be difficult, especially when the habit reflects in your finances. That’s why it’s important to work with a mortgage lender who wants you to accomplish your goals.
When you work with one of our Loan Originators, speak with them about enrolling in credit coaching. Although we’re not credit repair specialists, we can connect you to a Fannie Mae approved platform that can work with you until you reach your goals. When you’re ready to get started on your home finance solutions, contact us today!
Homestead Funding offers exceptional customer service and a convenient mortgage process. Whatever your financing needs, our goal is to exceed your expectations.