Improve Credit Lower Mortgage Rate

Get a Lower Rate - Improve your Credit

Get a Lower Rate – Improve your Credit

Mortgage rates are up however you can get a lower mortgage rate by improving your credit.  Yes, it’s true – the Fed and Mr. Bernanke have turned the lights out on the “ridiculously low mortgage rate” party.   Either that or the light bulbs just plain burned out.  After-all, we celebrated historically low rates for years!   Now that Arizona mortgage rates are out of the 3% range and have nestled comfortably for now in the 4% range it’s time to get back to basics.  These basics were habits that home-buyers used in order to get a lower mortgage rate prior to the days when we all were spoiled by unsustainable low mortgage rates.

Arizona home-buyers’ mortgage rates are directly impacted by their credit score.  It’s a simple relationship – the higher one’s credit score the lower their mortgage rate.  Conversely, the lower one’s credit score the higher one’s mortgage rate.  This is true on all loan types.   The impact credit score has on a borrower’s mortgage rate is more pronounced on a Conventional loan however rate is also impacted by credit score on a USDA, FHA, VA and JUMBO home loan.

Improve Credit – Get a Lower Mortgage Rate

Improving your credit can be your own little mortgage rate time machine.  I cannot guarantee you that it will take you all the way back to when rates were at their lowest levels in 2013 however consider the following idea for a moment.  If you currently have (and have had) a 660 middle credit score your rate on a Conventional loan may have been 4.0% (4.1648% APR*) back when rates were at 3.5% (3.66% APR*) for those elitists with 740 credit scores.  Now, if you were to look for a mortgage in today’s slightly higher rate environment your 660 score could likely fetch you a rate of 5.0% (5.1749% APR*) while the 740 gang is able to get 4.5% (4.6697% APR*).

You (unlike those credit perfectionists in the 740 range) have an opportunity to cut your rate increase due to the shifting rate market from a 1% jump to only a .5% bump by improving your credit score.   The 740 folks do not have this opportunity.  By the way, have we met – my name is “Silver Lining.”  In all seriousness, now that rates are up a bit, those with lower credits scores should be focusing on ways to improve their credit from 660 to 740.   This credit score face-lift would allow you to see your rate possibly go up only .5% instead of 1%.   Hypothetically (based on the examples used in this article), your rate would only increase from 4.0% (4.1648% APR*) (when rates were historically low) to 4.5% (4.6697% APR*) (in today’s rate environment) if you improved your score from 660 to 740.  The people who were at 740 the whole time will have seen their rate options (based on these hypothetical rate examples) go up from 3.5% (3.66% APR*)  to 4.5% (4.6697% APR*) – a full 1%!

How to Improve Credit to Lower Your Mortgage Rate

Improving credit can take on many forms.  The first step to improving your credit is to first analyze the status of your current overall credit profile.  Your Arizona Mortgage Lender can help you do this.   Learn more about how to improve your credit.  You will find many different strategies that can help improve your credit score.  There is also a breakdown of how a credit score is determined.  This knowledge alone can often help one hike up their credit score and possibly get a lower mortgage rate.

APR based on a $250,000 30 year fixed Conventional Mortgage

By Jeremy House

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