Your credit score is an essential component in qualifying for a mortgage and can determine your mortgage rate. Main stream mortgage lenders are looking for a minimum credit score of 600. Although an even higher score may allow you to qualify for a larger mortgage, it won’t get you a better mortgage rate. A score lower than 600 however will get you a significantly higher mortgage rate.
Not only are you facing a higher mortgage rate but you will have to seek out an alternative mortgage lender that will accept higher risk profiles in exchange for higher mortgage rates. The interest rate premium will be an additional 1.50% and up depending on how low the score is and the size of your down payment. A 5% downpayment mortgage is out of the question and you’ll likely need at least 15% down.
If you’ve been turned down by a mortgage lender because of your credit score then seek out the advice of a trusted mortgage broker. They can shop the market to find the most attractive alternatives.