Mortgage rates, the amount of interest that lenders charge on home loans, are important to pay close attention to when you’re shopping for a home. Despite being a small percentage, the mortgage rate directly affects the amount you pay each month and how much you’ll pay over the life of the loan. A lower rate means a lower monthly payment.
No matter where mortgage rates are, getting the lowest one is always a good investment. Because of this, if you’re planning to buy a home, you should start monitoring your credit now.
Credit Reports Determine Your Creditworthiness to Lenders
A lender will pull your credit report when you apply for a mortgage to determine your creditworthiness. Your credit report contains information about old and existing accounts, payment history, and negative items such as collections and bankruptcies.
If you intend to purchase a home soon, you should review your credit report as soon as possible. Before you begin applying to lenders, you’ll want to know what’s in your credit report. False information on your credit report could be a sign of human error or even identity theft.
Incorrect information should be disputed with the credit bureaus and/or the company providing the information. Because the dispute process can take a while, it’s a good idea to start looking for inaccuracies before you begin shopping for home loans.
Credit Scores Determine Your Mortgage Rates
Your credit report does more than help lenders decide whether to work with you – it also determines your credit score, which plays a large role in determining your mortgage interest rate. Mortgage interest rates are generally lowest for people with excellent credit scores.
Due to higher mortgage rates, consumers with bad credit scores might end up paying hundreds of dollars more per month and tens of thousands of dollars more over the mortgage’s lifetime.
Check Your Credit Now
Get a head start on the home buying process by checking your credit now. You should obtain your credit reports from all three major credit bureaus – Experian, Equifax, and TransUnion – and review the information to make sure it is accurate. You should also determine your credit score and what range you fall into.
You should start building your credit score now if your credit report contains errors or if you wish to spend some time improving your credit score. Monitoring your credit reports and credit scores from all three credit bureaus can help by providing regular copies of your credit report and credit score updates. When you work towards becoming a homeowner, you can track your credit progress.
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