What does my credit score need to be to buy a home?
A good credit rating increases your chances of securing a mortgage to buy a home.
In effect, it shows the lender that you are likely to repay your loan on time.
If your score is low, banks may refuse to lend you money – or you’ll get a worse rate or offer than advertised.
We tell you what your credit score needs to be to buy a home.
What does my credit score need to be to buy a home?
Credit scores typically range from 300 to 850, with 300 the worst possible and 850 the best.
While you don’t need a perfect credit score to get the best mortgage rates, there are some general requirements you should meet.
The minimum credit score requirements vary depending on the type of loan you take out.
What is a good credit score?
FICO, the most well-known credit scoring system, and its rival VantageScore both use a range of 300 to 850 points.
Below, we list what is considered a good and bad credit score, according to both systems.
- Poor: 300-579
- Fair: 580-669
- Good: 670-739
- Very good: 740-799
- Exceptional: 800 or more
- Very poor: 300-499
- Poor: 500-600
- Fair: 601-660
- Good: 661-780
- Excellent: 781-850
The FICO score is the most common among lenders, although there are other options such as VantageScore as well.
Below are the minimum credit score requirements for several mortgages, using FICO estimates.
Keep in mind that a wide range of other factors also have an impact before getting a mortgage, such as wages and affordability.
Jill Gonzalez, analyst for personal finance website WalletHub, told The Sun: “You can get a mortgage even with a credit score as low as in the 500s, but that would mean a higher interest rate and fees. additional.
“Generally, the higher the credit score, the lower the mortgage interest rate and the better the loan terms.
“Typically, a credit score in the mid-700s or higher will get the best rates. “
Conventional mortgage – Minimum score: 620
Conventional mortgages are not insured by a government agency, but rather follow the standards set by the government sponsored mortgage companies called Fannie Mae and Freddie Mac.
Conventional loans can be guaranteed by one of these companies or a private lender.
The minimum FICO score you will need for a conventional mortgage loan is currently 620.
Jumbo Loan – Minimum Score: Typically 680
A jumbo loan exceeds the maximum loan amount limits set by the Federal Housing Finance Agency.
For most of the United States, the 2021 maximum loan limit for single unit properties is $ 548,250, an increase from $ 510,400 in 2020.
This means that any mortgage larger than that is a jumbo loan.
Loans cannot be insured by Fannie Mae or Freddie Mac, which means they are riskier for lenders if you cannot afford the repayments.
There is no formal requirement, but most lenders require a credit score of at least 680 to get a jumbo loan.
FHA loan – Minimum score: 500-580
A Federal Housing Administration (FHA) loan is for borrowers with smaller down payments and with poorer credit scores.
These loans require two mortgage insurance premiums: one is prepaid and the other is paid annually for the remainder of the loan if you put less than 10%.
The minimum score required depends on the down payment: if you pay 10%, you only need a credit score of 500.
But if you only have 3.5%, you need a credit score of 580.
VA loan – Minimum score: Typically 620
A Veterans Loan (VA) is a mortgage issued by private lenders and is partially backed by the Department of Veterans Affairs.
Eligible borrowers can use this type of loan to purchase a property as a primary residence or refinance an existing mortgage.
You don’t need to make a down payment for this mortgage.
Again, there is no official minimum score required, although most lenders require a FICO score of at least 620.
If you have a low credit score
If your credit score is below requirements, you might have a hard time getting a mortgage unless someone you know can help you.
Having a co-signer with a better credit score, for example, could help you get the loan.
It is also worth improving your credit score – you can check our guide on how to build it.
However, it’s important to keep in mind that your credit score isn’t the only factor when lenders are considering you for a mortgage.
They will also look at how much you have available for a down payment, if you are in debt, and how much you are earning – just to name a few examples.
How to check credit score and report for free
There are many ways to check your credit score for free.
For example, many credit card companies, banks, and lenders have started providing credit scores to their customers.
It may appear on your statement or you can access it online by logging into your account.
Wells Fargo customers, for example, can access their Free online FICO score.
Meanwhile, the credit report is the information that lenders and businesses use to calculate your credit score.
You are generally entitled to a free copy of your credit report every 12 months from each of the three national credit reporting companies.
These agencies include Equifax, Experian, and TransUnion.
However, due to the Covid pandemic, you can get free credit reports every week until April 2022.
You can order it from annualcreditreport.com, the only authorized website for free credit reports, according to the Federal Trade Commission.
Alternatively, you can call 1-877-322-8228
In 2020, a new credit rating system has been introduced – and it can prevent you from being accepted for cards and loans.
A few months ago a super saver revealed how she bought her first house at 23 low income and with an average credit rating.
Meanwhile, a real estate expert shared how to buy a house if you have bad credit.