Many people are wondering what credit score is needed to buy a house. There are many factors that go into determining this number, but the two main factors for lenders are your debt-to-income ratio and your credit history. Good credit history is an important factor in qualifying for a loan because it shows that you have been able to make payments on time in the past.
What does my credit score need to be to buy a house? This is one of the most common questions we hear when discussing mortgage loans with our clients, and there isn’t a specific answer as it varies depending on who you ask!
But, if you want some guidance from experts, the moreirateam goes over some of the basics below. Let’s explore this in detail.
Basics of Your Credit Score
As mentioned, lenders look at a couple of important factors when approving loans. But your credit score is based on many different factors, such as credit history, debt-to-income ratio and even the types of credit you use.
Credit types range from instalment loans, like car loans, to recurring debt, such as credit cards. Paying on time for any of these credit types is very important to improve your score.
Credit Score Needed to Buy a House
When you are looking to buy a house, your credit score needs to be very high. FICO scores start at 300 and go up to 850. The higher the credit score, the better your chances of being approved for a mortgage loan.
A good FICO score is 680 or greater. If you have this type of credit history, then it’s likely that lenders would be willing to work with you on a home purchase loan.
Types of Home Loans based on Credit Score
Sometimes, a high credit score needed to buy a house can be hard to get to. But, there are many types of financing based on credit scores.
The FHA Loan can be an option for people with lower credit scores that still want a mortgage. Low down payment and flexible income requirements are possible with this type of loan. The downside is the insurance premiums can be costly, but it does offer some flexibility to get into your first house.
FHA Loans typically need a minimum credit score of 580 to be approved, but if you have a higher FICO credit score, you may get better rates.
Another loan available is the VA loan. The credit score needed to buy a house is much lower at 620, and there are no down payment requirements with this type of mortgage. You will need military service to qualify for this loan, plus you can’t have any other mortgages on your home or land as collateral.
The USDA Home Loan offers low-interest rates for buyers with scores as low as 580.
What Credit Score Do I Need to Buy a House?
Since there are so many options available, you can range from a FICO score of 580 to qualify for a home loan. We always recommend keeping an eye on your credit report at a minimum of one time a year. More frequently if you plan to buy it soon.
Our professionals at the moreirateam can help you better understand your credit score and what is needed to buy a home. Reach out to us today to discover your options.