In order to get a mortgage and buy your own house, it’s important to know what credit score you need. Your credit history will affect how much money the bank is willing to loan you, as well as the interest rate that they are able offer.
The 620-credit score is not just a number, it’s an integral component of your financial life. If you are looking to buy property with conventional loans and have anything below this figure then beware that the low credit rating may lead you towards getting denied for any loan at all or having worse interest rates than those who apply using FHA, VA, or USDA mortgages regardless if they’re in need of something less expensive like a condo.
Convincing the bank you’re worthy of a mortgage is no easy feat. In order to do so, it’s important to ensure that your credit score is high enough for them by taking some steps before applying.
Buy a Home with Minimum Credit Score
They say you should never judge a book by its cover, but the truth is some people can’t afford to do that. You don’t need perfect credit score for every type of loan – just those backed up by government agencies like Veterans Affairs or USDA loans.
For minimum types of mortgages, the following credit score requirements apply:
- Conventional Loan: 620
- FHA Loan: 580 in most cases
- VA Loan: 580
- USDA Loan: 640
- Jumbo Loan: 700 – 740 based on loan amount
The government does not insure loans that are considered conventional and jumbo. As a result, the minimum credit score required is greater for these types of mortgages than it would be with other lenders who offer insurance on their loan products.
What Credit Score is Suitable for a Home Loan?
You may find yourself in the dark about how to get a mortgage because there are so many options, but you can make it easier on your wallet and reduce all that stress with this guide.
A high-credit score allows me an opportunity of becoming eligible for loans faster than someone without one due to my proven track record of keeping debts paid off each month so far throughout time.
The FICO score ranks borrowers on a scale of 300 to 850, with 850 being the best possible.
Many people dream of owning a home, but this is only possible if they have an excellent credit score. A 760 or higher will get you the best rates on mortgage loans and still qualify for low interest rate offers from banks.
How Will My Credit Score Affect Interest Rates?
This is why it’s so important to have a decent credit score! It might not seem like such an essential thing, but your credit score has the power to make or break whether you qualify for a loan. The higher that number goes, the lower of interest rates you will pay (and vice versa).
Credit scores are important in many ways, but they can also make a big difference on your monthly mortgage payments. For example, if you have a credit score of 660 and increase it to 700 points (a significant jump!) then with the same $300k loan amount over 30 years that difference is staggering! You’ll save yourself an extra $61 per month; adding up to more than $18 thousand at the end of those three decades.
Can I Get a Home with Bad Credit?
If you want to buy a house, it’s important that your credit score is at least 620 or better. If not, you’re likely to have more trouble getting approved for the mortgage and will pay higher interest rates on top of an already high monthly payment amount.
Banks can be strict, but if you’re not quite at the mandated minimum credit score to qualify for a loan then there are options. With a co-signer in tow your chances may increase since they will share responsibility of paying off the debt should anything go wrong (provided their own finances meet requirements?)