Your credit score matters in home loan approval and determining the rate you ultimately receive. Essentially, the higher the score, the lower the interest rate. That's why you must consider any action that might affect your score, such taking out new credit. Even a small loan can have a significant impact. If you're applying for a home loan within the next few months and considering taking out a loan or applying for new credit before then, you'll want to get the facts.
Lenders use your credit score as a sort of barometer for your financial credibility. The higher your score is, the more credible you are in the eyes of lenders.
There are five areas they look at:
There are two types of inquiries made when applying for new credit, soft and hard, and each of these impacts your credit in different ways.
A soft inquiry (sometimes called a soft pull) is primarily for educational purposes, such as when an employer conducts a background check, or you're getting preapproved for a home loan. This type of inquiry has no impact on your credit score.
A hard inquiry (or hard pull) happens when you're attempting to establish new credit, such as getting a mortgage, credit card, student loan, or car loan. A hard inquiry does impact your credit score and lowers it temporarily.
A typical hard inquiry can make your credit score drop by around 5 points per occurrence. Although this can seem like a huge dip, "new credit" only accounts for about 10% of your overall score, and it usually recovers in a couple of months. But if you're shopping around and applying for several loans "just to see if I get approved," the negative impact can start to add up and lower your score significantly.
Hard inquiries will influence your credit score but not by an amount significant enough to disqualify you from getting approved for a home loan. If you've been on time with the rest of your bills and have been limiting your credit utilization, then the chances are excellent that you'll be approved for a low-interest rate home loan.
Unsure if there are steps you need to take before applying for a home loan? We can help! After a free consultation and a 360-degree view of your financial health, we'll let you know the fastest route for getting approved for a low-rate home loan.
American Funding Center strives to ensure that its services are accessible to people with disabilities. American Funding Center has invested a significant amount of resources to help ensure that its website is made easier to use and more accessible for people with disabilities, with the strong belief that every person has the right to live with dignity, equality, comfort and independence.
American Funding Center makes available the UserWay Website Accessibility Widget that is powered by a dedicated accessibility server. The software allows americanfundingcenter.net to improve its compliance with the Web Content Accessibility Guidelines (WCAG 2.1).
American Funding Center accessibility menu can be enabled by clicking the accessibility menu icon that appears on the corner on the page. After triggering the accessibility menu, please wait a moment for the accessibility menu to load in its entirety.
American Funding Center continues its efforts to constantly improve the accessibility of its site and services in the belief that it is our collective moral obligation to allow seamless, accessible and unhindered use also for those of us with disabilities.
Despite our efforts to make all pages and content on American Funding Center website fully accessible, some content may not have yet been fully adapted to the strictest accessibility standards. This may be a result of not having found or identified the most appropriate technological solution.
If you are experiencing difficulty with any content on American Funding Center website or require assistance with any part of our site, please contact us during normal business hours as detailed below and we will be happy to assist.
If you wish to report an accessibility issue, have any questions or need assistance, please contact us by sending an email to: email@example.com