Your Mortgage: Add some points … save some bucks

Mike Miles

By Mike Miles

Does anyone know their FICO? Does anyone know what FICO stands for? FICO stands for Fair Isaac Corporation and it is the most commonly adopted method for determining a person’s credit score. I’ll ask again … anyone know what their FICO credit score is? Don’t get confused and think a scoring model provided to you by a credit monitoring service is your actual credit score … it’s not.

Credit scores are the first thing looked at by lenders when determining a borrower’s ability to qualify for a home loan. You should know what it is. Knowing it, and about it, can save you big time bucks … like thousands of dollars.

FICO credit scores range from 300 to 850. Any score under 580 will generally mean a borrower isn’t eligible for a home mortgage loan. For any score above that … a person is eligible for a loan and then it becomes a situation of what type of loan is best and how low can the rate be. The higher the score … the lower the rate … no matter what.

Generally speaking, scores above 760 are considered “great” (I say super great), scores between 700 and 760 are considered “good” (I say really good) and scores between 650 and 700 are considered “fair” (I say pretty good). Any scores under 650 are creeping into the territory of being “risky” (I say sort of good) but still eligible.

Depending on the type of loan a borrower would be trying to qualify for, credit scores can be broken down into 20-point brackets with each bracket representing different pricing. Below is an example of a conventional loan based on a loan amount of $266,000 over a 30-year period.

There are some big differences in total interest paid amounts. In reality, most borrowers with a 620 score will probably do an FHA loan and not a conventional loan but you still get the point on how important a good/great FICO score is. Let me remind you these are not guaranteed situations, and this is to illustrate a generality that even a small boost in your score (20 points) can make a difference of $10,000 or more in interest paid.

Knowing your score is power. If your score isn’t where you want to be … you can do something about it quickly. My recommendation (if you are thinking of getting a home loan) is to have a reputable lender pull your credit and to provide you with loan proposals and a complimentary consultation. I say “reputable” because every lender will pull your credit for you but not every one of them will do the other things … which is where the real value is for you.

This weekly Sponsored Column is written by Mike Miles of Fountain Mortgage. Located in Prairie Village, Fountain Mortgage is dedicated to educating, and thus empowering, clients to make the best financial decision possible for their situation. Contact Fountain Mortgage today.

Mike Miles NMLS ID: 265927; Fountain Mortgage NMLS: 1138268