It’s helpful to know what credit score is required to buy a house when applying for a mortgage becauseyour credit score affects loan eligibility and the rate of interest you could receive.
A 620-credit score is required to buy a property with a conventional loan, while you may get a loan with a lower score if you apply for an FHA, VA, or USDA loan. Homebuyers possessing credit scoresnearing 760 or above are candidates for better mortgage interest rates.
There are steps you may take to enhance your credit score before applying for a mortgage. The most straightforward path is seeking help from Credit Repair of Tampa.
Buy a Home with Minimum Credit Score
The required credit score varies based on the type of loan and who the insurer is. For government-backed mortgages, such as those backed by the Department of Veterans Affairs, the Department of Agriculture, and the Federal Housing Administration, the eligibility requirements are less stringent.
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
Because the government does not insure conventional and jumbo loans, the minimum credit score required is greater.
What Credit Score is Suitable for a Home Loan?
It would help if you had a minimum credit score to qualify for a mortgage, which varies from 500 to 680 depending on the mortgage program.
A higher credit score can help you qualify for a mortgage by demonstrating to the lender that you will likely repay your loan on time.
Lenders frequently assess a borrower’s FICO credit score during the application process, which ranks customers in a range of 300 to 850, with 850 being the best possible score.
A credit score of 760 or higher is required to purchase a home, and applicants having credit scores in this range are more likely to get the best home loan interest rates.
How Will My Credit Score Affect Interest Rates?
Your credit score has a significant impact on the interest rate you get on a house loan. Borrowers with higher credit scores typically qualify for lower mortgage rates, which can save them thousands of dollars over the life of a mortgage.
Every lender uses a different calculation to help your interest rate, but even a slight difference in your credit score can save you a lot of money. For example, increasing a credit score from 660 to 700 might save you $61 per month against a $300,000 mortgage. Calculate this on a 30-year mortgage, and the difference is staggering.
Can I Get a Home with Bad Credit?
A credit score of less than 620 is unfavorable for a mortgage. While obtaining a mortgage with a poor credit score is doable, you will pay higher interest rates and monthly payments.
If your credit score is below the required minimum, you may still secure the loan if you add a co-signer, make a larger down payment, or reduce your debt-to-income ratio.