Don’t wait til your credit score is perfect.
There’s an old proverb that goes “the best is the mortal enemy of the good enough.”
This means that waiting for conditions to be absolutely perfect can be costlier and more counterproductive than acting boldly in the moment when conditions are merely favorable.
Why? Because you will potentially wait a long time – and if you’re renting, you’re probably spending the whole time paying rent to your landlord who bought the house when interest rates were even higher than they are now!
This applies to homebuying as well: New research shows that while good credit (defined as having good FICO scores) is highly correlated with receiving low interest on mortgage loans, you don’t need to wait around until your credit is perfect.
In fact, as of last month, people with merely good but not great credit were getting mortgage loans with terms nearly as good as those whose credit reports were pristine.
Aohe wa ua ao, aina e ka hauliuli.
“It was nearly daylight when the fish began biting.” – Hawaiian proverb
Said of a person who had nearly given up hope, but after a long wait, finally attains his desire.
Why is this happening? Simple: Bankers are bringing in a lot of deposits, thanks to a strong economy, and the pressure is on for them to put that money to work. There’s not as much demand for refinancing these days, so these banks need to find new customers to lend to. So they have to compete more aggressively for homebuyers. As a result, they are forced to offer better deals to more buyers in the “fat part” of the credit score bell curve.
Today’s average score is a record high 702. But last year, borrowers putting up a 5 percent down payment with below-average credit scores between 670 and 679 were getting mortgage offers averaging 5.2 percent last year.
At the same time, applicants with near-perfect credit scores over 800 got mortgage offers with interest rates averaging 4.78 percent.
That’s a difference of only 0.42 percentage points!
In that environment, if you have decent but not perfect credit, it doesn’t make too much sense to wait until your credit score rises even more. 0.42 percent is not worth paying rent longer, and probably not worth risking mortgage rate increases across the board, while home prices continue to rise.
The best time to get pre-qualified is now. And with mortgage rates actually the lowest they’ve been in a year, now is an excellent time to buy a home.
If your credit score is less than perfect, you can still qualify for a great home loan. People with credit scores in the 600s and even some in the 500s are getting approved every day. This is true both for conventional and FHA loans.
To get pre-qualified for a home loan, fill out our online application here, and start looking for a home.
Or call us today at (808) 891-0415 and we’ll walk you through the process.