mortgage knoxville

mortgage knoxville

A lot of things go into credit approval for a mortgage knoxville or any debt for that matter. The first thing that happens when you apply for a mortgage, is a check of your credit worthiness is done by one or all of the three major credit bureaus … Equifax, Experian and TransUnion. A credit “score”, or FICO, is calculated which reflects your history of paying bills such as credit cards, loans for cars and other debts you may have.

For example IF your credit score is:

720-850 your interest rate might be 5.793%

700-719 your interest rate might be 5.918%

675-699 your interest rate might be 6.456%

620-674 your interest rate might be 7.606%

560-619 your interest rate might be 8.531%

500-559 your interest rate might be 9.289%

So you see ... even though the advertised rate might be 6.5%, if your score is better or worse than average, the interest rate you qualify for might be dramatically different from your neighbor with a higher or lower score.

The score is a value assigned to several standards used in making a lending decision. These criterion include how much you owe on non-mortgage accounts like credit cards, your payment history and credit history. People (someone who actually scores your credit) will take the information from the report and plug it into formulas that calculate the value representing the amount of risk a lender may responsibly take. That value is used as a gauge and is compared to other borrowers with a similar profile. On examination, a lender is able to gauge your credit worthiness and can then make an informed decision as to whether or not to lend you money. The Fair Isaac Corporation calculates the FICO score which ranges from 300 to 850. The higher FICO number the more credit worthy you are from a lenders perspective.

This is a major component but far from the only one. Lenders look at payment history like; late payments, ability to pay (how much money can you afford to borrow with your given earnings power), earnings potential and income to name a few. If you are self employed or are a long time employee of a major company, these data have an influence too.

Applying for a mortgage knoxville is different than applying for a layaway account at a department store or a credit card. Exposure for a lender to a long term debt is different than a month to month credit card for example. Different, in that a credit card company can cancel your card, having been exposed only to the limit of the card, but evicting you from a home for non-payment is a much different matter, so the lending on these two kinds of debts are different. In a mortgage knoxville, the lender wants you “involved” in the debt and will generally ask for a partnership deal … they want you to have a financial interest in the debt … that is they want a down payment of 20% - 25%. This is very common as they now have a customer that is interested in keeping payments up on the debt so as not to loose their investment. Not having the down payment doesn’t mean you’ll not get the loan, as there are many “no down” loans being made today. If however, there is no down payment the lender will likely ask for an insurance policy (PMI -- private mortgage insurance) be taken out at the expense of the borrower to reduce lender's risk of the borrower just vacating the property at the lender's expense of reselling the property or even sitting on it for a long period until it can be resold. So a mortgage knoxville is the type of loan that requires a higher score to qualify at a favorable rate. If you have a low credit score, your chances of getting a loan are better if you’re willing to participate in a larger way … that is have a bigger down payment. It demonstrates to the lender you’re willing to carry a bigger burden … that is accept more long term risk if a loan is given and you’ll likely be provided with a better interest rate too boot. Do lenders all “score” you the same? No they don’t. So shop around for the best rate.

mortgage knoxville