What Is the Minimum Credit Score to Buy a House?
What Should My Credit Score Be for Buying a Home
Buying a house can be scary. Buying your first home, even scarier. One question that is coming up when people are thinking of buying a home is, “What should be credit score be for buying a house?
If you are looking to buy a home, there are a few things you need to do in order to check to see how your credit score is.
First, find out what your credit score is by running a credit report. Some sites offer free credit reports, these are fairly reputable, but you should always research the company first. Once you find a reputable way to run your credit report, you’ll see what your credit score is.
Some credit cards offer a free credit score with their perks that they offer you. Capital One offers a report for its customers. Once you find out your score, you can research or contact a realtor about how they work with potential buyers and inquire about the lenders that that use.
Options
If your credit score is 580+, you can qualify for an FHA loan to purchase a home. The VA loan requires a 620+ credit score to be approved. The USDA loan asks that your score is 640+. FHA 203K Loan has a required credit score of 620+ and the Conventional loan requires a 620+ to be approved.
First time home buyers that think they do not qualify for an FHA loan, maybe be mistaken. FHA loan qualifying may be a possibility even if you have poor credit. It is quite rare to be approved for an FHA loan if your credit score is under 580.
If your credit score is lower than 580 then, you will have to pay at least 10% down for the FHA loan. A home buyer with a credit score is 580 or better, 3.5% down payment is required for an FHA loan.
If your score is less than 580, you are not excluded from an FHA loan, but you may encounter higher down payments or you may want to work on your credit score before you buy a house.
Home Credit Requirements
When you are buying a house, there are certain requirements that lenders look at when making a decision on whether or not to approve you for a loan. One requirement is debt to income ratio.
Debt to income ratio us one thing that lenders will look at when someone applies for a home loan. It is derived by dividing monthly debt by your monthly income. It is given as a percentage.
Lenders will use this as a way to determine how well you take care of your monthly debts. This shows lenders if you can afford to repay the loan.
If you have a high debt to income ratio, it makes you risky for lenders to approve you for a loan. So, this may be a problem to get approved for a home loan.
How Do I Improve My Credit Score?
The minimum credit score for first time home buyers should be at least 600. The higher you score, the better your chances are to get approved for a mortgage loan.
If you have a bad credit score, you can improve it in order to qualify for a home loan. Paying your bills on time is one way to improve your credit score. You can improve your credit for making utility and cell phone payments on time.
Paying off your debt and keeping your balances low on credit cards and other revolving credit can increase your score too,
Even if you’re apprehensive about this, applying for new credit accounts is helpful. Only when you need it though.
Do not close your unused credit cards, this will decrease your score. You do not want too many inquiries for new credit. If you have anything not true on your credit report, dispute it.
Your credit history will appear on your credit report as well. This will tell you about when your first card or some sort of credit began, how long have you had credit, your payment history, and more.
You want to have a good credit history and history of making payments on time.
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Credit Score Needed for First Time Home Buyer
First time home buyers may experience a different credit score requirements every year. In two years, these can change drastically. Let’s compare 2018 and 2019.
Credit Score Needed to Buy a Home in 2018
Having a house credit score that is high, will be much easier for you to qualify for a mortgage loan. Credit scores to buy a house in 2018 varied quite a bit as the lowest in 2018 was 500.
Many lenders would like 500-600 for the credit score. The higher the score the higher the probability you will be approved as 600 is preferred and accepted more so than any score in the 500s.
In 2018, the rules were the same as now in regard to putting a down payment down and how your credit score affected that. The Federal Housing Administration will approve those with lower credit, however, the higher your credit, the less down payment you have to pay on your loan.
Credit Score To Buy A House in 2019
If your credit score is 500, you may qualify for an FHA loan, however, you will have to make a larger down payment. The VA loans do not really have a minimum FICO score. Additionally, the USDA Rural Housing in most cases requires a 640 credit score to be approved as Fannie Mae and Freddie Mac require a 620 minimum score.
Mortgage Lenders
Here are some mortgage lenders that we have researched. We have some facts about each lender.
Rocket Mortgage:
- Nation’s #1 online lender
- Options: home purchase, refinance,cash-out, debt consolidation
- Pre-approved for free
Wells Fargo:
- Offers loans that don’t require monthly insurance
- Less cash upfront
- Easy to Own programs give options for those with lower income, limited credit history, and low down payments.
Navy Federal Credit Union:
- Customers qualify for no down payment
- Home choice mortgage programs
- Super jumbo loans
- Fixed rates and consistent payments
- No private mortgage insurance needed
- Refinance options available
- Seller contribution of up to 6% allowed
- Best in class service
- Never leaves you
Most of these lenders would like a 620 credit score as first-time buyers will be approved with this credit score.
What Is the Minimum Credit Score to Buy a House?
The minimum credit score to purchase a house is at least 500. We have researched a lot of sites, and a 580 credit score should be the number to shoot for and the lowest anyone would except.
Fannie Mae and Freddie Mac suggest that the minimum credit score for a house purchase is around 620. This score is what most lenders prefer to see on their applicants; records. FHA loans do approve lower scores, however, these people have to pay higher percentages down.
Lower credit scores are iffy for lenders and a lot of them are apprehensive when the credit score is really low. If your credit score is lower than 500, then you will not qualify for an FHA loan.
Whatever lender you decide on using for your home loan, the real estate agent(s) and lenders will receive compensation, no matter what.
Interest Rates
Another factor in home buying are interest rates. A 30- Year Fixed rate is 4.04%. For a 15-year Fixed rate, it is 3.47%. A 1 year fixed rate is 3.88% and a Jumbo 30-year fixed rate is 4.23%.
Keeping track of the interest rates when buying a home is a must. Talking to your lender will help you really understand what your options are as far as loans and rates.
Good luck on your home buying adventure.
