The Best Mortgages for Excellent Credit

Getting a mortgage loan is easier when you have excellent credit. If you have a credit score of 720 or higher, you'll usually qualify for the lowest mortgage interest rates, something that can save you hundreds of dollars a month, depending on the size of your mortgage loan. Because your high credit score will allow you to qualify for so many loan types, you'll need to look at the pros and cons of each to determine which mortgage loan is best for you.

30-Year Fixed-Rate Mortgage

The 30-year fixed-rate mortgage is the most popular type of mortgage loan for a reason: When interest rates are low, they come with some of the lowest mortgage payments because the home loan is spread out over so many years. If you have good credit, this is especially true. Borrowers with top credit scores will qualify for the lowest interest rates, bringing down the monthly payment on a 30-year loan. There is a drawback, though: Your monthly payments, in part because of your high credit scores, will be low. But because the loan is spread out over three decades, you'll pay far more in interest during the life of the loan. You'll have to determine if the benefits of a lower payment each month outweigh the negatives of paying significantly more in interest.

15-Year Fixed-Rate Mortgage

The 15-year fixed-rate mortgage loan is a good choice for you if you have excellent credit. You'll pay far less in interest over the life of the loan because you'll pay off your loan in half the time it'll take you with a 30-year fixed-rate mortgage. Many homeowners don't take advantage of this because they can't afford the higher monthly payments that come with this shorter-term loan. If your credit score is high, though, you'll qualify for extremely low interest rates. The interest rates that come with 15-year fixed-rate loans are lower than the ones attached to 30-year mortgage loans. These low interest rates might lower your payments enough so that you can afford them, eliminating the excess interest you'd pay if you took out a longer-term loan instead.

Adjustable-Rate Mortgage

As its name suggests, an adjustable-rate mortgage starts out with one interest rate and then, after a set period of time -- usually seven or 10 years -- adjusts to a new one. Borrowers choose these loans because the initial interest rate is usually below market rate. This allows homeowners to pay less each month until the loan adjusts. The risk is that when the rate adjusts -- and adjustments are tied to different indexes depending on the specific loan -- it might jump to a far higher level, boosting the monthly payment. If your credit score is high, your initial interest rate can be extremely low on an adjustable-rate mortgage. The lower payments that result from this can make owning a home a more affordable expense. You'll still have to worry about your new interest rate once your loan adjusts. But if that rate is too high, you can request a mortgage refinance. Though a refinance is never guaranteed -- especially not if your home loses value -- a high credit score makes one more likely.

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About the Author

Don Rafner has been writing professionally since 1992, with work published in "The Washington Post," "Chicago Tribune," "Phoenix Magazine" and several trade magazines. He is also the managing editor of "Midwest Real Estate News." He specializes in writing about mortgage lending, personal finance, business and real-estate topics. He holds a Bachelor of Arts in journalism from the University of Illinois.