It’s important to know what your credit score is when applying for a mortgage because it can affect loan eligibility and the interest rate you’ll be charged. A low score, less than 620 on most scales, might keep approval from happening at all or could make rates higher depending on how deep into debt someone is.
A credit score of 620 is required for a conventional mortgage, but you may get loans with lower scores if applying to FHA/VA or USDA. A higher-than-average credit score can lead to better rates on mortgages.
Some of the steps you may take to enhance your credit score are seeking help from Credit Repair of Pros of Atlanta. This company can assist with everything from bankruptcy and foreclosure filings, address errors on your report, get in touch with creditors for disputes over debts owed or paid off prematurely; they will even send letters requesting removal of items that should not be there.
Buy a Home with Minimum Credit Score
Some government run programs offer lower loan requirements to veterans, farmers and those in need of affordable housing.
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 conventional and jumbo mortgages so lenders require more stringent requirements when approving these types of loan applications.
What Credit Score is Suitable for a Home Loan?
Qualifying for a mortgage is tough, but it’s even tougher when you need to have an almost perfect score. Even if your credit isn’t that bad, lenders will still give preference to people with higher scores than those who are just above the minimum requirements- unless they’re applying for one of their more lenient programs.
A higher credit score can land you a house. If the lender sees that they will most likely get their money back, it is an incentive for them to approve your mortgage application and give you approval to buy your new home.
Imagine the best possible score is your FICO credit score. It ranges from 300 to 850, with 120 being bad and 835 being great. Your objective, as a borrower, should be to reach an 835 before you apply for loans.
Credit scores are one of the many factors that lenders use to determine how creditworthy a potential borrower is. A score in this range will be seen as more favorable and put you on top when it comes time for loan rates.
How Will My Credit Score Affect Interest Rates?
With a higher credit score, it becomes easier to qualify for lower mortgage rates. Your interest rate can save you thousands of dollars over the life of your loan.
Think about the time when you were applying for your first mortgage. You might have had a credit score of 660 and been offered an annual interest rate of 9% but if raised that to 700, then it could be as low at 5%. Imagine how much more money this would save over 30 years.
Can I Get a Home with Bad Credit?
A credit score of less than 620 is unfavorable for a mortgage. While getting approved with such low scores may be possible, you will pay more on interest rates and monthly payments as well. Credit is important, but don’t let your low credit score discourage you. If the minimum requirements are too high for you to meet and maintain on a monthly basis then adding another person as co-signer or putting down more money now can help offset what may be going wrong in your life financially.