What effect does a borrower's credit score have on mortgage applications?

A borrower's credit score is a critical factor in the mortgage application process because it serves as an indicator of the borrower's creditworthiness. Lenders use credit scores to assess the risk of lending money to the borrower. A higher credit score generally suggests a lower risk, which can lead to more favorable loan terms. This includes the potential for loan approval and lower interest rates.

When a borrower has a strong credit score, lenders are more likely to approve the mortgage application and may offer lower interest rates, reflecting the reduced risk associated with lending to that individual. Conversely, a lower credit score might result in higher interest rates or even denial of the application, as the likelihood of default increases.

In contrast, options that suggest the credit score is irrelevant or only applies to specific types of loans do not accurately reflect its importance in the overall mortgage approval process. The nuances of various loan products—including government-backed options—may include different criteria, but credit scores remain a significant factor across the board.