First-time homebuyers in San Jose often underestimate the importance of a credit score. What can a three digit number possibly do to jeopardize your loan, right? As it turns out, it can. It can make or break your loan application. For a homebuyer, it might be another three-digit number. But for the lender, it is his measure of risk; the probability that you will not default on the loan application.
In fact, there is no other factor which has a more significant weight on your home loan application than your credit score. It has a direct impact on how your request is processed, the amount of time it takes to handle it and ultimately, the result which you get. Over time, a good credit score can help you save thousands of dollars worth of money.
You can, if you want, correct your credit score. With some amount of fiscal discipline, there are many ways to do it. If you want to get professional help about it, we suggest you give one of the San Jose credit repair companies a call and discuss your situation.
Why is your credit score so important
In this article, we have listed down three reasons why you must fix your credit score before going for a home loan application in San Jose.
- Home loan approval
Look around the internet a bit about the minimum credit score you need to get a home loan. Sites will tell you about the FHA loan, which requires a 500 points credit score with a 10% down payment. Sounds good,
However, this is only theoretically correct. The reality is entirely different. The policy allows for a 500 point credit score to qualify for a home loan, but it is rare for a score below 580 to get a loan approval. Hence, you can give an application. They will even consider it. But, there is a good chance it won’t get approved.
- Home Loan Rates
What if, somehow you can get your application approved? Problem solved, right? No, far from it. Your credit score even has a bearing on the kind of rates you receive for your home loan. For example, if you have a rating between 580 to 620, you will be paying a rate which is 2-4% more than the lowest available slab. If you have a rating score even below 580, you will have to incur some very high rates.
On the other hand, if you have a rating score above 760, you will be offered a loan at the lowest interest rate available. Think about the difference a 3% increase in interest rate can have on your monthly expenses. If
you fix your credit score, you can save that 3% for yourself. Better still, you can reinvest it.
- Repeated attempts to get credit
So, why can’t I go for an application and we will see what happens. We often get to hear these kind of a statement from our customers. However, there is a serious issue if you apply multiple times and get rejected
every time. It can affect your chances of securing credit anytime in the future.
Repeated credit request rejections are the last thing lenders want to see in your loan application. They raise alarm bells and increase their risk. They can severely reduce your chances of getting your loan approved.