Sunday, June 26, 2011

Credit Score and Mortgage Rates

I was watching the news the other day, and something came on about real estate and mortgage rates.  They mentioned the importance of having a good credit score and how people with better credit scores could get a better interest rate on their loans.  If the credit score wasn't as good, the banks might still give someone a loan, but they'd charge a higher interest rate, because that person was a greater risk.

It just seemed kind of wrong to me.  A bank feels that someone is at a greater risk for defaulting on a loan, so they charge a higher rate, making their monthly payments higher, and making it harder for that person to pay - and therefore increasing the risk.  At least in my mind.  I realize the banks have to protect themselves and their money, but it just seems wrong to me.

Not everyone can qualify for veteran home loans, but it's a good option for those who do, those who've so unselfishly served our country.  VA loans are guaranteed by the federal government, so the banks don't have to take on the risk, allowing qualified veterans to get the lowest possible rates.  One of the benefits of VA home loans is that a veteran or an active military borrower can be approved for rates not much higher than someone who has a large down payment and great credit.  And that means they're more likely to be able to pay the mortgage and stay in their homes, and that's good for everybody.