Florida Mortgage Costs Depend Largely On Good Credit; Clean Yours Up Now

Marian Griffin knew about credit scoring before she visited a loan officer to apply for a Florida mortgage to buy a town house.

But she was quite surprised to learn that her actual credit report showed a lower score than she’d expected, despite a lifetime of clean credit.

The issue? Griffin had been late with two Florida mortgage loan payments after her husband died, because of funeral expenses, delays in receiving the life insurance payout and general emotional turmoil.

Each payment was 32 days late. Her Florida home loan had a 30-day cutoff.

When she first visited Beacon Financial Group, the Florida mortgage company was able to prequalify her for a 7 percent rate so that she could downsize to a town house. By the time she sold her home and went back to the lender, her loan officer was able to get her a rate at 6.75 percent.

As Griffin found out the hard way, credit’s role in the mortgage process is more than approval or rejection. Credit scores also help determine whether you get the best Florida mortgage loan rates available, or pay more to compensate the lender for taking a chance on you.

Credit reporting bureaus use a system to assign a number to each consumer, an indication of the quality of the person’s credit:

• The maximum is 850.
• Higher than 800 is rare.
• Higher than 700 is enough for red-carpet treatment, such as less paperwork and a lower down payment required.
• Lower than 620 spells complications for getting a mortgage.

“It’s almost got too much power,” said Scott Bray, branch manager of Contemporary Mortgage Services in Melbourne.

He’s seen clients approved for an FHA-backed loan, but later turned down for homeowner’s insurance because of their credit.

Check your report now, lenders advise, to give yourself time to clear up mistakes or bump up your credit score. That’s the best way you can ensure that you’re getting the best treatment with the most important investment you’ll ever make. Here are some tips for making your score the best:

1. Make payments on time: It’s obvious, but bears repeating.

Late payments are credit-killers, particularly if they occurred within the past six months of your mortgage loan application. A late car payment a few months ago will cause your score to plummet. If it’s at least a year old, you could have one late payment on your report and survive. After two years or so, late payments won’t affect your score anymore.

Rent and especially Florida home mortgage payments are crucial because they show a lender how responsible you’ll be in that area.

Be particularly careful with credit cards. Credit card companies are more likely to pounce on a late payment and use it to their advantage, jacking up the interest rates they charge you at a moment’s notice.

2. Establish credit: If you’ve never had a loan, lenders will have no track record for judging your responsibility, and credit is all about your financial history.

Opening 3-5 accounts to establish a good credit history and keeping it safe by sticking with department store and gas station cards is the way to go.

To play it even safer, charge something once, cut up the card, but let the account stay open for a year or so. Any longer than that, and you’ll need to use it once in a while to have it be any help to you. An account with no activity is useless. You need to demonstrate that you can control debts and improve credit.

3. Stay below your limit on credit cards: If your credit limit on a card is $1,000, and you carry a $950 balance, you’ll look maxed out, even though your debt obligation is low. Some people intentionally keep their credit limits low, to reduce their exposure to fraud.

4. Keep debt payments low: If you need to take out an auto loan, keep the monthly payments down. Your monthly obligation is more important than how long the remaining term is, when it comes to qualifying for a Florida home loan. The good news? Once you have the loan, the deal is done.

“For the next 360 payments, they’re never again going to ask about your credit report,” Bray said.