Improve Credit get a Better Home Loan Rate

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Mortgage rates are up.  However, did you know you can get a lower mortgage rate just 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.

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Improve Credit – Get a Lower Mortgage Rate

Arizona home-buyers’ mortgage rates are directly impacted by their credit score.  It’s a simple relationship – higher credit scores equal lower home loan rates.  This is true on all loan types except some Down Payment Assistance loans.   The impact credit score has on home loan rate is more pronounced on a Conventional loan.  However home loan rates are also impacted by credit score on a USDA, FHA, VA and JUMBO home loan.

Improving your credit is your own little mortgage rate time machine.  There is no guarantee it will take you way back to when rates were at their lowest levels in 2013.  However, consider the following idea.  Assume you currently have (and have had) a 660 middle credit score.  Your interest rate on a Conventional loan may have been 4.0% (4.1648% APR*) back in 2013.

This is 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*).  The elite 740 gang is now able to get 4.5% (4.6697% APR*).

Cutting Your Rate

You (unlike those credit perfectionists in the 740 range) have the chance to cut your rate in today’s higher rate environment.  You do this by improving your credit score.   The 740 folks do not have this opportunity.  By the way, have we met – my name is “Silver Lining.”

Now that home loan rates have increased those with lower credits scores should focus on how to improve their credit from 660 to 740.   A credit score face-lift allows you to see your rate possibly go up to 4.5% (4.6697% APR*) in today’s rate environment by raising 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%!

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How to Improve Credit to Lower Your Mortgage Rate

Improving credit comes in many forms.  First, you need to analyze the status of your current overall credit profile.  Your Arizona Mortgage Lender will help you do this.   Learn more about how to improve your credit.   There are countless different strategies that help your credit score improve.  Knowledge alone allows y0u to improve your 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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