What is your credit score?
As the U.S. lenders continue to recover from the "loose" lending policies of last decade, credit scores play an increasingly larger role in mortgage approval decisions.
A high FICO score can mean the difference between a low mortgage rate and a high one; a preferred mortgage product and a "backup" one; and, a mortgage approval and a mortgage denial.
Like everything else is real estate, though, credit scores can be a local phenomenon. A recent study from credit reporting firm TransUnion breaks it down.
A high FICO score can mean the difference between a low mortgage rate and a high one; a preferred mortgage product and a "backup" one; a mortgage approval and a mortgage denial.
Consumers with high credit scores can get access to "prime" mortgage rates as published by Freddie Mac, and can have lower costs of homeownership as compared to the general U.S. population.
Mortgage applicants with excellent credit scores can sometimes get certain loan costs waived, and can sometimes make a smaller downpayment given a certain loan type.
That's all great news for residents of San Jose, California which TransUnion identified as the nation's best city for high credit scores.
With an average credit risk of 700, the San Jose-Sunnyvale-Santa Clara region topped the next highest city by 4 points, but that city is a neighbor to the immediate north. With a score of 696, the San Francisco-Oakland-Fremont area ranked number two.
Both metropolitan regions are characterized by high income jobs related to technology, and both are designated "high-cost" areas for housing.
The top 10 cities with the lowest credit risk are :
It's notable that these ten regions are neither concentrated by geography, politics, or industry.
On the other end of the scale, the cities which represent the highest credit risk include Lakeland-Winter Haven, Florida (651); Las Vegas-Paradise, Nevada (650); and Memphis, Tennessee-Mississippi-Arkansas (638).
The good news is that credit scores are temporary condition; a snapshop in time. It's a basic process to increase your credit score, and one that can mean the difference between getting approved for a mortgage and getting turned down.
The basic steps to improving your credit score quickly are :
And, lastly, give it time. Credit scores are meant to predict the likelihood of you defaulting on a loan and the best predictor of how you will behave in the next 90 days is your track record of the most recent 6 months.
After 6 months of clean credit history, many people see substantial FICO changes.
It's estimated that for every 20-point improvement in your credit score, you can save up to 0.250 percentage points on your mortgage rate.
The difference between a 640 FICO and a 740 FICO, therefore, can be the difference between a 4.50% mortgage rate and a 3.50% mortgage rate, or $2,800 per year on a four hundred thousand dollar home loan.
See how your credit score affects your mortgage rate.
The information contained on The Mortgage Reports website is for informational purposes only and is not an advertisement for products offered by Full Beaker. The views and opinions expressed herein are those of the author and do not reflect the policy or position of Full Beaker, its officers, parent, or affiliates.
Ron Z. Real Estate Agent
I am a full-time Realtor and I look forward to daily updates from The Mortgage Reports. The advice is useful and the insight is important. Thank you!
Katrina B. Lab Technician
I look forward to reading The Mortgage Reports. Its information and updates helped me to buy my first home. Thank you!
Elizabeth C. Librarian
Thanks to The Mortgage Reports, I have a new, very low rate for my home. I owe you so much.
2015 Conforming, FHA, & VA Loan Limits
Mortgage loan limits for every U.S. county, as published by Fannie Mae & Freddie Mac, the Federal Housing Administration (FHA), and the Department of Veterans Affairs (VA)