You may have heard some buzzing over the past few weeks in regards to the upticks in interest rates. While this may or may not be a factor that is influencing your current buying decision, it is beneficial to understand how interest rates affect your overall purchasing power.
Whether it is high or low, your interest rate is going to ultimately determine that final amount that you are cutting a check for at the end of every month to cover your mortgage payment. That being said, it definitely is worth understanding how much your rate will affect your payment. While it is relatively easy to illustrate the difference in your purchasing power with a higher interest rate, versus a lower interest rate, it often times isn’t communicated so clearly when purchasing a home and many people end up making uninformed decisions.
In the illustration above, it is clear to see that with a lower interest rate, you are able to afford more home, whereas a higher interest rate, really limits your purchasing capabilities. Simply put, when rates are higher, you have to settle for less. While there are many factors within the government and the economy that drive the mortgage rates up or down, there are still factors within our control that can help us improve our creditworthiness and ultimately boost our financial well-being.
Understanding your credit file and what is affecting your score (positively or negatively) is the trailhead to achieving a better credit score. Once you understand the impact that certain actions have on your score, you can then start to adjust behaviors and habits to start making improvements. Achieving a great credit score is relatively simple once you understand how the scoring models work. That being said, everyone’s timeline is going to differ based on their current debts and their abilities to pay them off.
Your credit optimization strategy will address which debts to start tackling first, which types of credit cards you should apply for, how many and what types of trade lines you should have in your file, and how to manage your trade lines in a fashion that maximize your point potential. One thing to note is that not all points are created equally; understanding the difference will help you prioritize your financial actions.
All too often, buyers are led to believe that the bare minimum credit score is what they should achieve in order to purchase a home. While this is the simple truth, it typically doesn’t take much longer to achieve an even higher credit score that will save you more money in the long run as well as improve your overall financial situation in general. Given an education on how credit works, 30 to 60 days could be the difference of a 600 score and a 680. Your interest rate depends on you taking the time to understand how you can positively impact your score.
Tru Path Credit goes beyond addressing the negative items on your credit report. We will also help you understand how to establish and build a positive credit file. We also work with preferred lenders and realtors that are willing to cover the majority of your credit optimization costs through our Home Buyer Credit Optimization Program. Please click here to set up a free consultation.