One Simple Tip to Save Thousands on a Mortgage

The single best tip to getting the best rate on a mortgage is to check your credit score and credit history. Don’t check it just before applying; check it in advance, up to a year in advance of when you are planning to apply for the mortgage. When it comes to applying for a mortgage, your credit isn’t the main thing – it’s the only thing.

To see how this works in the real world, take a look at the following example. If you are applying for a $200,000 mortgage and have a credit score of 620, you may qualify for a rate of 5.7%. The same loan with a credit score of 760 would potentially secure a rate of 4.18%. This may not sound like much, but over the course of the loan, the higher rate would end up costing you almost $67,000. That’s enough to put your kids through college, or retire a little earlier than you planned.

Here are several steps to get your credit cleaned up and ready for the optimal interest rate:

  1. Go to and get your free credit report from all three agencies. Review and dispute any inaccuracies.
  2. Pay down your debt. You shouldn’t be using more than 30% of your available credit.
  3. Don’t close old accounts. The longer your credit history, the better.
  4. Pay your bills on time, all the time. One late payment on your credit history is one too many.
  5. Avoid new credit. At least while waiting to get an optimal loan, it’s a good idea to not open any new accounts. These can temporarily lower your credit score and shorten the average length of your credit history.

This may sound like a lot of work, but it is worth it in the end, as it can save you tens of thousands of dollars.

About cozbycpa

Heather L. Cozby is a CPA on the South Shore and Cape Cod. The managing partner of Cozby & Company, LLC, Heather has the resources and experience necessary to provide quality professional services on a timely basis and at a reasonable cost. She specializes in tax planning & preparation; audit, review & compilation services; management advisory services; bookkeeping; and accounting. Her unique niche is in working with homeowners’ associations and condominium trusts, advising with rental real estate, and providing outsourced financial consulting for mid-sized companies. She is more entrepreneurial than most accountants, and offers the best of both worlds - providing the services of a larger firm while retaining the ability to connect with her clients on a personal level.
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