Your mortgage interest rate is largely determined by your credit score. The credit score is the critical factor in getting lower interest rate. Find out your credit score; ignorance can be very expensive. Follow these tips to save your money and get a lower interest rate on mortgage.
Your credit score is a crucial part of your finances and is determined by your credit records. These records are maintained by 3 major credit agencies: Experian, Equifax, and Trans Union. Your payment history and your debt-to-income ratio will decide your credit score. It is used by your lender to decide whether you are eligible for the credit, the terms of the loan and the interest rate applicable to you.
You credit records are the historical account of your debts, if you have paid it back and the delays if any. Review these details carefully as these details might be entered erroneously. Ask the agencies to send you the copies of your credit report. Scrutinize them carefully for any mistakes and report the same to the respective credit agency. By making timely payments and clearing all outstanding balances, you can raise your credit score.
Besides the interest rate, your mortgage terms will also be decided by your credit score. Certain lenders expect you to pay a certain amount to avail of special interest rate. Usually, it is 1% of the loan that you have applied for. But if your credit score is high, your lender might waive it off.
Mortgage lenders base their decision to offer you a certain interest rate on your credit score. They will analyze how much of a risk they take by lending you money. For low credit score, they charge higher interest rate. Hence change your credit score before you apply for a mortgage. Repairing poor credit record will save you money since you can get a lower interest rate.