Mortgage lenders want to be sure that the loans they give out will be paid back in a timely fashion, and one of the surest ways for them to measure that is by checking credit scores. One of the most important things you can do to expedite and simplify the home buying process is to make sure that your credit score is in good shape before you make moves to purchase a home.
What Credit Score Do I Need For The Best Mortgage Loan?
The lowest mortgage rates and down payments come with impressive credit scores. With a credit score of 720 or above, you are in the “excellent” territory. A credit score this high will get you a low-interest rate, as the lender can see that you are trustworthy when it comes to repaying other lenders and credit card companies. With a 30-year, $200,000 mortgage, a borrower with a credit score above 760 can save as much as $193 in monthly payments as compared to a borrower with a score around 620. Around 700, your score is still considered good and around 680 it is veering on average. If you have a credit score around 640 or lower than that, you may have some trouble in getting a conventional mortgage from a bank or online lender. Try to keep your credit score around 680 or above for the best rates.
Can I Get A Mortgage Loan With A Lower Credit Score?
A low credit score does not indefinitely bar you from getting a mortgage loan. While you may not be able to get a conventional loan with a score in the lower 600s, there are government-funded loans to help borrowers. You can get an FHA loan from the Federal Housing Administration with a down payment as low as 3.5% with a credit score of 580 or higher. If your credit score is lower, you may face higher down payment rates and interest rates, but you can often still get the loan. The U.S. Department of Veteran Loans offers VA loans to active and veteran military personnel and do not require a minimum credit score. The USDA loan program helps borrowers with a low to moderate income purchase a home in a rural area and will consider those with lower credit scores.
If you have a dream of owning a home, don’t let a low credit score stop you from getting there. Look into alternative loan options that offer reasonable rates, or take some time to improve your credit score by paying down bills and credit cards. Buying a home is something all people can achieve with a little research and financial work.