Real Estate
February 25, 2020
link to facebook link to twitter
More Stories
Paying off debt to buy a house can be challenging Your income is a lifeline to finance a home How to plan the optimal time to buy a rental property How to make your financial profile less intricate A factor that can drive your mortgage cost up How child support and alimony can affect your ability to get a mortgage What to look for when getting a mortgage on a manufactured home Why getting a 30-year fixed-rate mortgage is a smart financial move How to lower your cash to close when buying a home What you need to know about securing a VA mortgage Mortgage payment relates to purchase price What to expect mortgage rates to change in the upcoming months Loan limits for 2020 make getting mortgage easier Three reasons to buy home at end of year Can you get a mortgage with bad credit? Income and all outstanding loans are key factors to obtain a mortgage How to get a mortgage without providing tax returns The new way to get a mortgage with 1 year income tax returns Four common home buying mistakes to avoid How to create wealth with your income and finances Should you buy a house with monthly mortgage insurance? 2019 conforming loan limits rise FHA loan limits for 2019 increase No more VA limits in Jan. 2020 Should you cash out to refinance What makes the most sense? Three pricey loan scenarios to watch A surefire way of making loan process a hassle Changing income and job status may affect mortgage chances Six common mortgage loan scenarios How to lower your debt to income when getting a mortgage Three reasons you should not buy a home Types of loans based on credit score How the FHA 100-mile rules your ability to rent or buy Three quirky issues that will hurt your mortgage Seven common mortgage mistakes Why your mortgage payment keeps changing The credit score it takes to get a mortgage What to expect in today’s loan process? How 1031 tax-deferred exchanges work Six to avoid when purchasing a home How to use rental income to qualify for a mortgage Mortgage inquiry makes your credit score drop? Why waiting for mortgage rates to get better is a losing proposition Transfer property to family and be protected under Prop 13 FHA requirement might hurt buying chances Purchase price should not be most important factor Finances matter when buying a home Could the 30-year fixed mortgage get to 3 percent? Mortgage rate sounds too good to be true How the mortgage process gets ugly if you have a difficult picture Should you go FHA or conventional for purchasing your first home? Two mortgage process problems you will want to avoid Home value when refinancing What you need to know about the mortgage 4506-t document Don’t make mistakes when getting a mortgage refinance A non-traditional program for self-employed mortgage borrowers Should you buy and build or buy a single family home? The loan process and what not to do Should you refinance with today’s mortgage rates? Be careful getting a mortgage if you have a bankruptcy Cash-out refinance or home equity Lender knows how to purchase business? Read the fine print Cash to payment formula when buying a home A bank statement program might help get a mortgage Pulling credit may not make sense Why the VA mortgage is the best home loan Can you use roommate income to get a mortgage? Best benefit for your first-time home buyer A loan program you may be eligible for based on your credit score Be wary about paying off this type of mortgage Common questions on financed mortgaged insurance loans Things that affect your first-time buyer mortgage options Self-employed income The #1 mistake consumers make when getting a mortgage… How much are closing costs when you purchase a house? Two mortgage loan programs get a better interest rate How much of your mortgage income should be going towards an auto loan? Five quirky refinance scenarios that work Working two jobs makes now easier to get a mortgage How mortgage lender credits work

How expensive your mortgage will be due to bad credit?

By: Scott Sheldon
June 21, 2019

If you’re thinking about getting mortgage loan financing, one of the most important things you can do to keep your mortgage costs low and affordable is to maintain a high and healthy credit score. Here’s what you should know when it comes to getting a mortgage with the credit score that you have…

Your credit score is the best barometer of how responsible you are. They want to know if this person has the character, desire and motivation to responsibly make their mortgage payment. If you had late credit payments here and there in the past, past due balances and a pattern of financial irregularity, that could spell trouble for getting a mortgage. In return that lender charges you an extra premium for the extra risk that they perceive you represent to them based on your payment history.

Let’s use an example $400,000 on a 30-year fixed-rate:

620 credit score 5 percent interest rate, you’ll pay $373,023 over the total term of the loan

660 credit score 4.625 percent interest rate, you’ll pay $340,360 over the total term of the loan

680 credit score 4.375 percent interest rate, you’ll pay $318,970 over the total term of the loan

700 credit score 4.125 percent interest rate, you’ll pay $297,875 in interest over the total term of the loan

740 or higher credit score 3.875 percent interest rate, you’ll pay $277,141 over the total term of the loan.

The above is not an offering of credit, but rather an illustration of the possible relationship your credit score would translate to in cost expressed over the term of the loan.

For a little over 100 points in credit score that’s an extra interest expense of nearly $96,000 over the term of 360 months on a 30-year fixed-rate mortgage. This compares the loan cost with a 740 score vs. a 620 score. That’s incredibly expensive spread.

If you have an issue with a creditor, if something is not right between you and a financial services arrangement, don’t just stop paying and let the account go to a derogatory status, resolve it and even if it means you having to take it in the shorts and here’s why…

Your future home loan could end up costing you significantly more money than just paying the $20 Macy’s bill for example.

These are some things to think about when determining whether you should get a loan.

Pay off your credit cards in full every single month. All the financial experts out there that tell you to carry debt, they’re wrong, carrying debt hurts you for getting a mortgage because it counts against your debt to income ratio. Always consider the source.

Pay all your bills on time or early

Don’t let any of your previous debts go to collections

Don’t just refuse to pay a bill and let the balance grow and accumulate with penalties and interest

If you’re not in a financial position to use the credit cards and pay them off in full each month, work towards keeping your credit card balances to no more than 25 percent of the total allowable limit. That means if you have a credit card for $1,000 you don’t want the balance to ever be more than $250 ever on that one account.

Moral of the story? Follow the golden rule. He who has the money makes the rules. This means the creditors make the rules and following the rules and making good financial decision will yield you a low rate, low payment home mortgage.

Scott Sheldon is a local mortgage lender, with a decade of experience helping consumers purchase and refinance primary homes second homes and investment properties. Learn more at