What Is A Good Credit Score To Buy A House?
If you are in the market for a house and need a home loan, your credit score is of the utmost importance. A high credit score will make it that much easier to obtain a home loan with favorable terms. Furthermore, a solid credit score will reduce the amount of money you need for a down payment on the property. Let’s take a closer look at what is considered a good credit score and the importance of your credit score when applying for a home loan.
What is Considered a Good Credit Score?
Credit scores range from 850 all the way down to 300. If you don’t have an 800+ credit score, don’t panic! You can still secure a home loan at a reasonable interest rate without forking over your life savings for the down payment. However, if your credit score is below 700, it might be difficult to find a lending institution willing to extend a mortgage offer at a reasonable interest rate with respectable terms. If your credit score is in the 600s, you might be able to qualify for a home loan, especially if you are willing to pay mortgage insurance. Mortgage insurance is an extra monthly fee tacked onto the mortgage payment to insure the home loan for the lending institution.
In general, a good credit score is in the range of 700 to 749. If your credit score is in this range, it will likely be fairly easy to qualify for a home mortgage. An excellent credit score in the range of 750 to 850. As long as you don’t have considerable credit card debt, you should be able to obtain a mortgage with favorable terms if your score is in this range. A poor credit score is a score of 650 or below. If your credit score is 650 or less, it will likely prove difficult to qualify for a home loan. However, if the bulk of your debt stems from student loans and you are willing to pay for mortgage insurance to insure the home loan on the lender’s behalf, you still might be able to obtain a home loan, but it might come at a comparably high interest rate.
No Two Home Loan Lenders are the Same
If you do not have a fantastic credit score and are denied a home loan or are offered a home loan with unfavorable terms, do not give up. Each mortgage provider has its own unique qualifications for home loans, specific interest rates, and terms. Even if one home loan lender rejects your mortgage application, there is a chance another will extend a home loan offer. Seek a home loan through a couple different lenders, compare the interest rates and terms and you just might obtain a loan that makes sense for your unique budget and situation. It might even make sense for those who have a low credit score to add a co-signer or tack on more to the down payment to secure a home loan.
When It Comes to Home Loans, Patience is a Virtue
Now that you know what is considered a good credit score, it is time to review your finances and personal credit score to determine your chances of qualifying for a home loan at a reasonable interest rate. If your credit score is not in the 700s or 800s, it might be best to wait until your score increases. Though you might be able to secure a home loan with a sub-par credit score, you will fork over that much more in a down payment and have an elevated interest rate. When in doubt, wait. Work on your credit score, make yourself that much more attractive as a potential borrower, and it won’t be long until you can snag a mortgage at a reasonable interest rate. If you have questions about your credit score or how to apply for a mortgage, contact our office today! We help people just like you everyday achieve homeownership, and we can help you too.