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Tuesday, February 24, 2009

Perfect Credit For Lower Rates

By Don Spelling

Remember that what is considered "A" credit to one company might not be "A" to another. "My broker says I have A credit. What is A Credit?"

Typically, "A Credit" would be someone with flawless credit, credit scores that are all over 720 (Equifax, Experian, and TransUnion scores), and would qualify for the best mortgage rates available pretty much anywhere, based on credit alone.

The difference in the credit score can be the result of many different variables. However, with mortgage lending someone can have perfect credit and only a 620 score and still be considered to have "A credit".

One possible reason for someone with perfect credit to only have a 620 credit score could be the fact that they are maxed out on all of their credit cards and have no revolving credit available. This would present a bigger risk for this consumer and result in the lower credit score.

Therefore, you may still have what is considered "A credit" and not fit the typical protocol for what others think "A credit" is and you may still qualify for the same exact rates as that borrower with an 800 score even if your is only 620. However, the credit score is not the only factor that determines whether you qualify for a loan or not. While it is a big factor, remember it is not the only factor.

An experienced and educated mortgage professional can provide you with a good chance to qualify for the best available rates out there.

Even with "A" credit, the interest rate you will get on a mortgage will vary depending on several factors. These include your credit score, your debt-to-income ratio, and the loan-to-value. The "loan-to-value" is the percentage of your home's value that you are applying to borrow.

The "combined-loan-to-value" is also considered. The "combined-loan-to-value" is the total percentage of your home's value that will be borrowed, including first mortgage, second mortgage and home equity lines of credit.

Credit status is important in measuring your "willingness" to repay your mortgage payments. Having good credit is reflective of your likeliness to repay. Credit is one of the three measurements an investor will review when underwriting your loan.

A-Credit typically means that you will qualify for the best interest rates available, and have access to a wider variety of programs than someone who may have had a few bumps in their credit history.

"A" Credit is a reflection of your credit worthiness. If you have A credit you typically have FICO scores of 700+, no mortgage lates, no consumer credit delinquencies, no bankruptcies, , no Foreclosures and minimal credit balances.

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