There are several factors that go into the decision to approve or deny your mortgage request when you buy a home: your income, your debts, the appraisal on your chosen home, and your credit score are just some of the factors. The question is, do all of these factors carry equal weight in the decision process? Or are some more important than others?

What Plays the Biggest Role?
Credit scores actually only became a big factor in the mortgage decision process in the late 1990s, when the Federal Housing Finance Agency insisted that lenders start using them. Since that time, however, they have become one of the most influential factors in the decision-making process.

How Does Credit Score Affect the Mortgage?
Credit scores are most often taken from the FICO model, which ranges from 300-850. Like grades on a report card from school, higher numbers are better. The higher your credit score is, the lower the interest rate you’ll be offered. A lower interest rate, of course, means you’ll pay less money over the life of the loan.

Even a difference of a few numbers can mean the difference of hundreds of dollars per monthly payment.

What’s the Lowest Score that Can Still Get a Loan?
There are published loan rates for scores as low as 620. However, each lender makes their own internal determination about when a score is too low, and what scores get the lowest interest rates.

How Can You Improve Your Chances of Getting Approved?
Ideally, improving your credit score if it’s on the lower side is the best way to improve your chances of getting a loan. Paying off old debts, disputing mistakes, utilizing credit appropriately and paying bills on time all help improve your score.

Going with a local lender can improve the odds of getting approved for a mortgage. Lenders that are locally based are able to look beyond just the facts to allow personal knowledge of the area and the market, and other information to determine that a score that might be risky elsewhere is not risky where you are.

While your credit score is influential, you shouldn’t let a slightly lower score deter you from trying to buy the home of your dreams. If you’re ready to buy, with a down payment and a home in mind, speaking with a lender can help you determine whether to take that next step.

About the Author: Lizzie Weakley is a freelance writer from Columbus, Ohio. She went to college at The Ohio State University where she studied communications. In her free time, she enjoys the outdoors and long walks in the park with her 3-year-old husky Snowball. The information in this article is credited to Premium Mortgage Corp.

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