Good or bad credit can impact if you can afford the house of your dreams.
Think About Credit First When Home Buying
First things first: If you're about to start shopping for a home but haven't checked your credit score, you'll need to visit a site like Experian to find out where it stands.
It's important to address your credit score before you begin house hunting or considering making an offer because your credit score is one of the factors in determining if you get a mortgage and how competitive the interest rates are.
Your FICO (Fair Isaac Co.) credit score is a financial snapshot that tells your lender what kind of borrower you are—if you pay your bills on time, have a steady income, if you're carrying a lot of debt or a little, and if you are likely to be able to keep up on your mortgage payments.
A FICO score of 800 is outstanding and opens the doors to the best possible interest rates. Lower scores, for example in the 500s or low 600s, won't qualify you for the same rates because the lenders perceive you to be a higher risk.
How a Credit Score Impacts Your Payments: An Example
Why does this matter? A basic mortgage calculator can help you understand how interest rates impact how much you'll pay for your loan over time.
For example, let’s say you have good credit and take out a mortgage for $100,000 over 30 years, at a rate of 3.75 percent. Over the life of the loan, you'd pay approximately $463 per month for a total of $166,722 in payments and interest over the life of that $100,000 loan.
If, however, you have excellent credit and qualify for a mortgage rate of 2.75%, your monthly payment drops to $408 per month. This comes out to a total of $146,967 over the life of the loan. The lower interest rate saves you $19,755 over the life of the loan. That's why good credit can save you so much money.
Disclaimer: The example above is provided for illustrative purposes only and does not reflect the current interest rates or terms being offered by the Bank.
How to Buy with Less Than Perfect Credit
So what if your credit is less than perfect? Does that mean you'll never realize your dream of homeownership?
No. That's why it's so important to sit down with a personal banker and take a realistic look at your finances, credit, and your goals. Credit scores change all the time. Making payments more frequently, reducing debt, and paying down higher balance cards are just a few of the strategies that can positively impact your credit score.
Your lender will also know of any loans that specifically are available for low-income buyers or those with lower credit scores, such as FHA, VA, or USDA loans.
Citizens Bank will help you connect with a mortgage expert to help you get the best possible rate and service so you can be on your way to homeownership.