Knowing what credit score is required to qualify for a home loan can greatly affect the way you choose to live. For instance, if your credit rating isn’t up-to-par or doesn’t meet certain guidelines set by lenders and mortgage companies, then it may be difficult or even impossible to afford purchasing property of any kind–condominiums are no exception.
There’s no denying it, the higher your credit score is, the better mortgage interest rates you’re likely to get. If you have a 620-credit rating or lower and are looking for financing from one of these lenders: FHA VA USDA; then that means that with conventional loans only they will not offer this type of loan.
If you are in the market for a new home, like many other buyers these days, having an excellent credit score is critical. For that reason alone it’s worth taking steps to enhance your credit before applying for a mortgage.
Buy a Home with Minimum Credit Score
The government is allocating more and more money to helping people purchase homes. Government-backed mortgages are less stringent than private loans, which means that with these types of loan options you have a greater chance at getting approved for the mortgage as long as you meet certain requirements such as having a minimum credit score.
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
Some mortgage companies require a high FICO or other standard to get approved which, in turn, can be tough if you don’t meet those standards.
What Credit Score is Suitable for a Home Loan?
If you want to purchase a home, the bank will give approval for your mortgage based on how much money they think you can afford. The minimum credit score needed is between 500 and 680 depending on which program it falls into.
A higher credit score can help you qualify for a mortgage by demonstrating to the lender that you have more money.
Lenders use a FICO credit score to rank customers, with 850 being the best possible. A bad credit history can negatively affect your chances of qualifying for loans and other important financial services such as renting an apartment or getting auto insurance.
A credit score of 760 or higher is required to purchase a home. This means you can expect lower rates for the loan, which may be just what your bank account needs.
How Will My Credit Score Affect Interest Rates?
If you have a bad credit score, then the interest rates on your mortgage are going to be high. Borrowers with good scores can qualify for lower mortgages and end up saving quite a bit of money in their lifetime because they get better deals when it comes time to pay back what’s owed.
Every lender uses their own personal calculation when computing someone’s interest rates – but even small differences like raising your credit Score by 60 points can make a big dent in monthly payment costs down the line. Take this case where Credit Scores were raised from 600-700: that single increase will result in saving about $61.
Can I Get a Home with Bad Credit?
A poor credit score is not a death sentence for borrowers looking to purchase a new home. With the right lending partner and buyer, you can still find success securing financing from an institution that best meets your needs while keeping in mind affordability factors such as monthly payments and interest rates.
Do you have a weak credit history? You may still be able to secure the loan by adding a co-signer, making an increased down payment and reducing your debt-to income ratio.