You may have heard that your credit score will determine whether or not you can get a mortgage and you might also know that it affects the rate and fees you pay for your loan. But did you know that it impacts everything from homeowners’ insurance rates to the price of car insurance?
Your credit score has a huge impact on your life and it could be holding you back from buying a home. While stricter lending standards could be a challenge for some, many buyers may be surprised by the options that are still available for borrowers with lower credit scores.
The average American has seen their credit score go up in recent years, and that’s a great sign of financial health. The higher your score goes, the better your chances of building toward a stronger financial future. As more Americans with strong credit enter the housing market, we see a natural increase in the distribution of FICO® scores for closed loans, as shown in the graph below:
If your score is below 750, it may seem like it’s not possible to qualify for a mortgage. But that’s not true! While most borrowers do have a credit score above 750, there are other factors involved in qualifying for a mortgage, and there are still options that allow people with lower scores to buy their dream home. Here’s what Experian, a global leader in consumer and business credit reporting, says:
- Federal Housing Administration (FHA) loans: “With a 3.5% down payment, homebuyers may be able to get an FHA loan with a 580 credit score or higher. If you can manage a 10% down payment, though, that minimum goes as low as 500.”
- Conventional loans: “The most popular loan type typically comes with a 620 minimum credit score.”
- S. Department of Agriculture (USDA) loans: “In general, lenders require a minimum credit score of 640 for a USDA loan, though some may go as low as 580.”
- S. Department of Veterans Affairs (VA) loans: “VA loans don’t technically have a minimum credit score, but lenders will typically require between 580 and 620.”
You know that having a good credit score will give you more options and better terms when applying for a mortgage, especially when lending is tight like it is right now. But even if your score isn’t perfect, there are still ways to get into the home of your dreams,
Bottom Line
The truth is that today’s market is full of opportunity so don’t let assumptions about whether or not your credit score is good enough put a premature end to your homeownership goals. Contact me today, your local real estate professional to discuss all of your options so you can make informed decisions about how best to achieve your dreams!
Source: www.keepingcurrentmatters.com