Keep an eye on your credit score

There are many good reasons to manage your credit when you’re planning to purchase or refinance a home.

Lower mortgage rates: Higher credit scores often entitle borrowers to lower rates. Fannie Mae and Freddie Mac, which buy many of the mortgages that consumers originate, charge premiums to borrowers at the lower end of the 620-720 credit score range. At the moment, borrowers with scores lower than 620 are ineligible to have a loan purchased by either organization. Many of these borrowers go to the Federal Housing Administration, which offers competitive rates, but can charge expensive mortgage insurance premiums, both up front and monthly.

Lower debt ratios: Part of the mortgage lending decision is to evaluate the borrower’s debt and the likelihood that he or she will be able to handle a mortgage in addition to that debt. Lower debt means lower monthly payments and helps you have a cushion should your income decline or be interrupted. Mortgage lenders like to see this, particularly in the current environment of high unemployment, debt and payment delinquency overall.

One of the basic ways to manage your credit is to make your payments on time. If you do carry revolving credit card debt, try to keep balances as low as possible – ideally 40 percent lower than the card’s credit limit. This will keep your payments low, especially in times when credit card companies are raising rates and lowering limits. Pay your utility bills on time as well. Utility companies report on the paying habits of their customers and a late payment can negatively affect your overall credit score.

Higher credit scores offer the best possible advantage: options. Global uncertainty and market volatility are pervasive, but you are still in a position to manage those areas over which you have control. Don’t get left out of the current low rate, buyer, purchase and refinance market. Take control of your financial future today.

Pamela Lamarre and Tracy Dearman are business partners and head California State Funding Group and HSM realty finance management, respectively. For a free consultation or more information about the mortgage market, email Lamarre at plamarre@sbcglobal.net or Dearman at tdearman@hsmsf.com. For additional information, visit www.hsmsf.com.

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