Sonoma County Mortgages

All financing provided by New American Funding

(707) 217-4000 | Prequalify Now
  • Home
  • Purchase
    • How Much Down Payment To Buy A Home?
    • How Much Income You Need To Buy A Home
    • How Much Should I Save For Buying A Home?
      • How Rates Affect Payment
    • No PMI Mortgages
    • FHA Loans
    • Sonoma County Disaster Loans
    • Jumbo Loans
  • Refinance
    • Mortgage Rates
    • Does It Make Sense To Refinance?
      • Get Your Refi Paperwork In Order
    • How To Pay Off Your Loan Faster
    • How To Remove PMI
    • How Lenders Price & Quote Loans
  • Loan Programs
  • Payment Calculator
    • Mortgage Affordability Calculator
  • Blog
  • Videos
  • Scott Sheldon
    • Scott Sheldon
      Senior Loan Officer
      NMLS ID# 287389
      Direct: 707 217-4000
      Scott.Sheldon@nafinc.com
      Specializing in Residential Home Loans for Primary Residences, Second Homes, Investment Properties, Single Family Homes, Condos, PUDs, 1-4 Units.

Get Your Latest Rate Quote Now!

Does It Make Sense To Raise My Credit Score For A Better Interest Rate?

March 6, 2013 by Scott Sheldon

Share on Facebook
Facebook
Tweet about this on Twitter
Twitter
Share on LinkedIn
Linkedin
Pin on Pinterest
Pinterest
Email this to someone
email
Print this page
Print

That’s the money question isn’t it? It depends on how soon you want your mortgage to close.

A better question to ask:

“Despite the credit score being low can you qualify with income, credit score you have, assets and other liabilities as well as the total new monthly mortgage payment?”

If the answer is yes, raising your credit score to try to secure a better interest rate would be questionable. For example, if there’s other concerns associated with your ability to qualify, such as cash deposits going into your bank account, multiple businesses, an overly high debt income ratio, then you’re better served working on the adverse items necessary for qualifying down the road than simply trying to increase your credit score for a better interest rate on a loan that you can’t get anyway.

Makes sense right?

Let’s say you do qualify, credit score isn’t great, but it’s not terrible either, call it middle of the road, 680, your income is enough to offset all the monthly liabilities, including the new house payment and you have sufficient assets needed by the lender for successfully funding the loan.

In other words, increasing your credit score a few points isn’t going to do much, when you have a 680 credit score, that is unless you can get the credit score to 700 or above.

Interest Rate improves based on credit score alone under these three credit score groups

740 or higher

720 higher

700 or higher

*Anything under a 700 credit score, pricing (interest rate) actually starts to deteriorate. This is why if your credit score is 620 through 699, in most cases, it makes sense to use the credit score you presently have as long as it’s within the 620-699 range rather than trying to play credit guru when chances are you’re not a credit score expert and doing something you think could be helping your credit score could end up having the opposite effect, lowering the score.

Most consumers are better served working with interest rate as determined by their credit score rather than making changes to their credit or liabilities in an effort to artificially increase the credit score for the purposes of getting a loan.

How interest-rate comes into the picture: it’s $7.25 payment change for every .125% change in rate for every $100,000 borrowed.

Put another way, the amount of time it would take to make a credit score go from 620, to 720 is the least 12 months. That’s 12 months you lose based on the opportunity presently available working with a credit score you have.

→Lost savings on a refinance or lost opportunity on a home purchase.

Additionally,the time and energy to prevent payment change of $14 per month on a loan amount $200,000 for example, would be significant. Meaning $14 per month on $200,000 borrowed, would be less expensive than the amount of time it would take to raise the credit score- to not have the interest rate rise the payment by $14 per month.

Moral of the story: if you can qualify for a mortgage whether that’s a conventional loan or an FHA loan or any other loan program on the market today, and your credit score is eligible and your income and liabilities are in line with the new mortgage payment you’re looking for, don’t let the prospect of a slightly better interest rate put you into a pursuit of chasing a moving target when you could otherwise qualify now. Interest rates are extremely favorable and they change daily anyway based upon market conditions.

Related Mortgage Advice from Scott Sheldon

  • How Your Fico Score Affects Your Ability To Get A Mortgage

    "Why can't I get the interest rates I see advertised on the Internet." One of…

  • Why Is My Mortgage Rate On My New Loan So High?

    In short risk-based pricing, the higher the risk the lender incurs the higher the mortgage…

  • How Higher Mortgage Rates Affect Payment

    Purchasing a home or refinancing a home loan?  If the interest rate is not locked,…

  • Get A Mortgage Rate Quote

    If you are looking for a Sonoma County Mortgage, get a mortgage rate quote. Mortgage…

Filed Under: Credit Score Questions and Answers

SCM on Zillow

Zillow Reviews for Scott Sheldon, New American Funding

SCM on Facebook

SonomaCountyMortgages.com

Location & Contact

Scott Sheldon, Senior Loan Officer
NMLS ID# 287389
1450 Neotomas Ave Suite 115
Santa Rosa, CA 95405
1-707-217-4000
Email Us!

Copyright 2019 SonomaCountyMortgages.com · About Us · Sonoma County Loans · Privacy Policy · Terms Of Use · Legal · Site Map

NMLS Consumer Access © New American Funding. All rights Reserved. NMLS ID#6606.
Corporate Office 14511 Myford Road, Suite 100, Tustin, CA 92780. We at New American Funding take great pride in our customer service and make it our number one priority. We encourage you to contact us for complaint resolution or any post-closing questions you may have regarding the servicing of your loan. We strive to have your experience with New American Funding a stellar one. In the rare case that our service did not meet your expectations, please call our customer care hotline at 1-800- 450-2010, ext. 7100 or you may contact us by email customerservice@nafinc.com. Please leave a detailed message and we will follow up with you no later than the end of the next business day. If you are using a screen reader or other auxiliary aid and are having problems using this website, please call 800-450-2010 Ext. 7100 for assistance.

State Licensing | Privacy | Terms of Use | Electronic Consent Agreement

Connect With Scott In Your Inbox

Looking for a home? Real estate insider? Get connected with Senior Loan Officer Scott Sheldon. Scott stays updated on the latest in the mortgage industry, so you can stay updated with him!