Perfect Credit Score Not Needed To Buy A Home!
Have you been wanting to purchase a home but are worried that your credit score is not perfect? Did you know that just 1.2% of Americans actually have a perfect credit score? Don't let a lack of perfect credit hold you back from buying your dream home!
There are many misconceptions about the credit score needed to buy a house. Recently, it was reported that 24% of renters believe they need a 780-800 credit score to be considered for a mortgage. They couldn't be more wrong!
According to Experian, a FICO® Score of 670 or above is considered a good credit score, while a score of 800 or above is considered exceptional.
Why Do Credit Scores Matter?
Mortgage lenders use credit scores as an indicator of how likely you are to repay your loan. If your credit score is under 690, you will likely be considered a high-risk borrower. Between 670 and 739, you are considered a reasonable risk borrower and according to Experian only 8% of borrowers are likly to become delinquent if their scores are between 670-739.
A credit score of 740-799 is considered a very good score by mortgage lenders and a very low risk for default. Mortgage borrowers whose scores are 740 and above generally also benefit from lower interest rates because they are considered low risk. Borrowers with scores of 800 or above will get the best rates a lender will have to offer, as they are considered exceptionally low risk.
What Kind Of Credit Score Do You Need To Qualify For A Mortgage?
There are numerous mortgage loan programs available for borrowers with lower or no credit scores required. While mortgage lenders might have differences in what they want in a credit score for various types of mortgage loans, in general, the following scores are what would qualify you for a mortgage:
- Conventional Loan: minimum FICO score of 620.
- FHA Loan: minimum FICO score of 580 with 3.5% down. Some lenders will approve an FHA mortgage for a lower credit score, but they will require a 10% down payment in this case.
- VA Loan: no minimum FICO score, but most lenders will require a score of 620-640.
- USDA Loan: as with a VA Loan, there is no minimum FICO score, but most lenders will require a score of at least 620-640.
- Jumbo Loans: typically a FICO score of at least 700-720 will be required.
And keep in mind, that it's not just about your credit score. Your payment history on loans and credit cards, as well as, total debt will also be considered, as will your employment history.
Don't let a less than perfect credit score keep you from buying a home!
Sadly too many Americans are unsure about their credit score and erroneously believe they won't qualify for a mortgage. They just assume that it is too low to qualify and do not double-check. Credit.com confirmed that only 57% of individuals sought out their credit score at least once last year.
If one of your 2021 new year resolutions is to buy a home and to stop paying someone else's mortgage, I'll be happy to introduce you to excellent mortgage lenders in the Greater Charlotte area who will help you get approved for a mortgage so you can buy your dream home. Contact me today for help with buying that dream home.
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