Are you concerned that a bad credit score might keep you from getting a mortgage even at today’s historically low instant rates? Surprisingly, this may not always be true.

Some borrowers with bad credit are able to get mortgage financing. In addition, it is also important that you keep in mind that credit scores are not permanent. Here is how to decide whether you should get a mortgage or improve your credit score first.

Your Score Is Too Low to Qualify

The concern that lenders have about low credit scores is that the lower the credit score, the higher the risk that the buyer will default. While some lenders will make exceptions for borrowers with bad credit by charging higher rates, others will simply pass. By improving your credit score first, you will greatly increase the odds of hearing “Yes” from more lenders, which puts the power back in your hands.

Borrowers With Good Credit Pay Less, Much Less

In the past few months, mortgage rates have declined. The average 30-year fixed rate mortgage was 4.87% in November 2019 according to Freddie Mac. As of March 2020, the average rate was 3.56%. This is a huge decline in just three-months. Rates are expected to fall even further as the coronavirus crisis continues.

Lower mortgages rates translate into smaller monthly loan payments for the principal and interest. It also means lower costs over the entire life of the loan. Even with mortgage rates at record lows, according to MyFICO.com, borrowers with good credit are able to obtain an APR of just 3.152% while borrowers with lower FICO scores can end up with an APR of as much as 4.741%.

Over the lifetime of the loan, the difference in the amount of interest paid between borrowers can be as much as $74,000!

The Bottom Line

The decision to apply for a mortgage now really depends on whether you can afford to miss out on an opportunity. If the potential benefits of purchasing a property far outweigh the benefits of improving your credit score first in order to obtain more favorable lending terms and lower interest rates, you might want to go ahead. You can always try downpayment assistance and first-time homebuyer programs to help you get your foot in the door.

If you can wait, consider contacting a credit repair service to help you get your credit score back on track before you apply.

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