When you’re buying a home, your credit score is one of the key factors that will determine whether or not you’re approved for a mortgage. So what is a good credit score and how can you improve your credit score if it’s not where you want it to be?
A credit score is a three-digit number that lenders use to assess your creditworthiness. It’s based on information in your credit report, which is a record of your credit activity. The most widely used credit scores are provided by FICO, formerly known as Fair, Isaac and Company, range from 300 to 850.
Generally speaking, a credit score of 700 or above is considered good, while a score of 800 or above is considered excellent. A score of 650 is considered fair while a score below 600 is deemed poor.
If your credit score is below 700, there are steps you can take to improve it. The first step is to request a free copy of your credit report from the major credit reporting agencies (Equifax, Experian and TransUnion) and look for any mistakes. If you do find any mistakes, dispute them with the individual credit bureau(s).
What’s the minimum credit score for a conventional loan?
Prospective borrowers should have a credit score of 620 or higher to qualify for the most favorable terms on a conventional loan. Certain banks may have credit overlays requiring a 640 or 660 middle FICO score. Lower scores make it more difficult to qualify and may even result in lenders offering higher interest rates, thus resulting in increased monthly payments.
To help you save money in the long run, it’s wise to verify your credit score before applying for any type of loan. Make sure you’re using the proper source. We’ve found a handful of borrowers who use the bank or credit karma credit monitoring services run into issues once we run their credit.
These services do not pick up small collections that may be settled or removed from only one or two of the three bureaus, not all three. If your near term goal is to buy or refinance a home you should monitor your credit scores as the lenders do with a specific credit score monitoring service. Ideally, one that reports the actual FICO score, not a Vantage score or singular credit bureau because for the most part they do not resemble what a lender pulls.
What credit score is needed to buy a house for the first time?
The minimum credit score to buy a home is 620 for a home loan for conventional and VA and 500 for an FHA loan. Some conventional lenders will have internal overlays and require a 640 or even a 660 minimum score. Keep in mind that although your credit score may allow you to buy a home, a low credit score with some lenders and loan products may require a higher down payment than someone who has a 720 or higher credit score.
What credit score is needed to buy a house with an FHA loan?
To qualify for an FHA loan, you must have a credit score of at least 500. If your credit score is between 500 and 579, you will have to bring in at least a 10% down payment. If your credit score is 580 or above, you may be eligible for a 3.5% down payment. Additional credit factors such as your payment history during the last two years plays a big role when your credit score is below 620.
What credit score is needed to buy a home or condo over $1.5 million with a 10-percent down payment?
For loans over $1 million that are not in high-cost areas, the borrower will likely need to have a 720 credit score or higher depending on the lender.
Can I get a HELOC or Home Equity loan with a 640 credit score?
Most lenders want you to have a minimum score of 680 although some will allow a low credit score down to 640 on a primary or second home. As with all loan programs or credit lines, the lower your credit score is the larger impact it has on your down payment and interest rate offered.