Your credit history is one of the principal measures used by a lender to determine your interest rate. Debt and income are also key players. Your credit score can also be a deciding factor when it comes to what loan programs you qualify for. A lower score can mean a higher interest rate, and a higher interest rate means a higher monthly mortgage payment. In other words, your credit score will directly affect how much money you can borrow. Don’t be discouraged if your score seems a little on the low side. You may be surprised once you talk to a lender.
Should I pay off my debt before applying for a mortgage?
Many people will tell you to pay off credit cards and loans, medical bills, collection accounts, and more before getting serious about the buying process. The truth is that paying off some accounts can actually hurt your score. You may need to pay down some of your debt, but a lender will be able to make sure you’re paying down the right items and not doing anything to potentially cause more harm than good.
