HOW YOUR CREDIT SCORE AFFECTS YOUR ABILITY TO GET A MORTGAGE

Your down payment is affected by your credit score

A bad credit score means that the lender will need to take measures to reduce his risks. This is, however, to your disadvantage because you will be required to commit more funds when it comes to your down payment. This means that when the lender accepts to make a mortgage available to you, the terms may be challenging for you to fulfill. This is why it is important for you to have an active credit score that is healthy. It will make lenders have faith in you.

High monthly rates

Compared to someone who has an excellent credit score, your percentage repayments are likely to be higher. This is because the lender considers you a high-risk business that he needs to be dispensed of within the shortest amount of time possible. You, therefore, get charged an exorbitant monthly rate which you will have to pay off if you do not want your credit score to suffer even more. This can be very difficult, but if you have a significant financial plan, you might be able to pull it off. If you can comply with the payments, then you will be on your way to correcting your credit score.

Shorter repayment period

Many lenders who consider you a high-risk client will want you to finish your repayments as soon as possible. This is because they expect you to default at some point. The assumption is, if you did it before, what guarantee do they have that you will not repeat the same? You, therefore, get high monthly repayment rates attached to a shorter repayment period. If you compare the repayment period for you and a person with a good credit score for the same mortgage amount, you will find your terms less favorable. This is why it is always important to have an active credit score that is not tarnished.

Tough conditions

In addition to the poor repayment rates and duration of payments, the lender may also impose harsh conditions for you in case you do not comply. You will find that you will always have to fight to prove that you can be trusted with credit despite your credit score. Should you default, the lender is likely to swoop in faster than he would for a person with a high credit score who has just defaulted. This is because of the risk attached to your mortgage. This means you stand at a higher chance of losing your home because of one default compared to people with active credit who have defaulted the same number of times as you.