The first and most important step is to know your Fico credit scores. Mortgage lending today is based on tiered pricing which means that rates are adjusted based on the middle of your 3 credit scores. The middle credit score will determine which “tiered pricing” you will be in. The higher your credit score, the better chance of obtaining a lower interest rate. There are many factors which go into determining a borrower’s credit score. I would recommend that you check out www.myfico.com and go under the “learn about scores” section to understand more about how your credit scores are calculated and what steps can be done to raise your scores.
One of the first things I do with my clients is to do a full review of their credit report. I will make suggestions on what they can do to increase their credit scores. Some of these simply items can be paying down on high limit revolving credit cards, reducing the amount of credit trade lines and paying off old collections or judgments. My system allows me to run a “what-if” scenario which will tell me exactly what your scores will be if you do certain things. This takes the guess work out of what you should do because it will tell you exactly what to do. This can be extremely important if you have a middle credit score of 699 and we can bring it up to 740+ without much effort. This can contribute to getting a much lower interest rate.
Mark Merry you local mortgage expert servicing the Edina and Twin Cities area.