How high does your credit score need to be to buy a home? Many believe you need a credit score over 700. CNBC just reported that the national average FICO score is now 706 – the highest ever! FICO is the score most lenders use for mortgages. So what if your score is lower than that? What do you need to buy?
Here is a breakdown of the most common mortgages and what you need for a credit score:
FHA Loan: FHA loans are ideal for those who have less-than-perfect credit and may not be able to qualify for a conventional mortgage loan. The size of your required down payment for an FHA loan depends on the state of your credit score: If your credit score is between 500 and 579, you must put 10% down. If your credit score is 580 or above, you can put as little as 3.5% down (but you can put down more if you want to). Many lenders do require at least a 580 credit score.
Conventional Loan: It’s possible to get approved for a conforming conventional loan with a credit score as low as 620, although some lenders may look for a score of 640 or better. Also the lower your credit score, the higher your interest rate and with lower scores it will be harder to get a conventional approval.
USDA Loan: While the USDA doesn’t have a set credit score requirement, most lenders offering USDA-guaranteed mortgages require a score of at least 640.
VA Loan:Â Lenders are likely to check credit scores as part of their screening process, and most will set a minimum score, or cutoff, that loan applicants must exceed to be considered. For most VA loans, you will need a 620 or a 640 minimum credit score.
It’s possible to buy a home with a lower credit score. Talk to your loan officer and see what you can qualify for. If your lender doesn’t offer FHA loans, you may want to contact someone that does. That can be one of the best programs for those with lower credit scores.
Leslie Vanderwerf, NMLS ID#335509, American Mortgage & Equity Consultants, Inc., An Equal Housing Lender, NMLS#150953 – Email – Website
