If you’re shopping for a new home and exploring Florida mortgages, you need to understand how your credit score will affect your ability to get a mortgage. Your credit score is not the same as your credit report, though your credit report does determine your credit score.

Most mortgage companies look at your FICO score. FICO stands for the Fair Isaac Corporation, and FICO developed one of the earliest methods for calculating credit scores based on your credit report, and FICO scores range from 300-850. Higher scores mean you have a better credit history and also make you eligible for lower interest rates on your mortgage.

Scores can vary

Since there are three major agencies that collect credit information (Experian, Equifax, and TransUnion), your score can differ slightly depending on which agency’s data is used to develop it. Also, FICO has several different scoring models for different types of loans, so your score can also differ depending on what you’re buying (a house or a car, for example). Errors on your report can lower your score, so it’s important for you to check your report and correct any errors, ideally well before you apply for a loan. You can request a free report every 12 months from each of the major credit agencies by visiting www.annualcreditreport.com.

Credit scores affect your rates

Borrowers who have high credit scores can generally get the lowest interest rates on mortgages, which is important. Decreasing your interest rate by even half a percentage point of interest can save you thousands of dollars over the life of your mortgage. In general:

  • A credit score of 740 or higher will get you the best interest rates from most mortgage lenders.
  • A credit score of 680 is considered an acceptable score for conventional mortgages, however, the higher the score, the lower the interest rate, and the MI (mortgage insurance) if applicable.
  • A credit score of 620 or lower will make if difficult (but not impossible!) to get a conventional mortgage. You’ll face more scrutiny and pay higher interest rates, but you can still qualify. You might consider qualifying for an FHA or other government-insured/guaranteed mortgages.

Find out more

If you’re interested in Florida mortgages, Embrace Home Loans can help. We can work with you to determine your scores and find out what mortgages and rates fit your financial needs. Call us at 407-733-6425.