You’ve heard a lot about the housing market recently, but what do all the changes mean for you? Spring is traditionally the peak home buying season, which typically results in a market only slightly favoring the buyer. However, the recent housing downturn means this year is a particularly strong buyer’s market. A buyer’s market means that there are more homes for sale, those homes tend to be selling slowly, and therefore many prices are reduced.
While this might seem like the perfect time to buy, it’s key to know where you stand in terms of your creditworthiness, and its impact on the mortgage interest rate you are likely to receive.
In simple terms, your credit score indicates your risk factor to lenders. That means that the higher your credit score — and the less of a risk you appear to lenders — the lower interest rates you’re likely to receive. Conversely, if you have a low credit score, you may pose a greater risk to the lender, so your interest rates might be higher. Even little changes can make a big difference; a mere 1% increase in interest rates could cost you thousands of dollars per year.
Whether you’re buying a home or trying to get your financial health in order, monitoring your credit score with Score Watch™ keeps you up-to-date on where you stand in the eyes of lenders. You’ll receive alerts of key changes to your score and the potential interest rates you could receive. Factors that impact your score include:
Along with building a good credit history, selecting the right mortgage is an essential step toward buying a home. It’s a good idea to research the two types of mortgages – adjustable rate (ARM) and fixed rate – to determine which one best suits your financial needs. Not sure which kind of mortgage is best for you? Try out this month’s interactive tool, “ARM vs. Fixed-Rate Mortgage,” to find the best fit.
The sooner you learn about your credit score and the effect it has on the home buying process, the sooner you’ll understand its impact on saving money over the course of your mortgage.