When wanting to buy a house, you will most likely need to meet a few qualifications, one of them being your credit score. Your mortgage lender will determine your qualification for financing based on this score, but this may depend on who the lender is. So what is the minimum credit score you need to obtain? In short, it depends.
A lender will determine the loan you can qualify for based on your credit score by taking into consideration several factors such as your payment history, salary history, current wage, available credit and the current economic climate. Usually, a score of at least 650 will allow you to cross that threshold and receive financing.
Fannie Mae is a government-backed mortgage lending organization. Many lending companies are influenced by what Fannie Mae does, and will go off of what they do. Fannie Mae’s minimum credit score for a conventional loan is around 620. This is something to take into consideration when considering getting a mortgage loan.
A government loan is also another thing to take into consideration. These companies include the Federal Housing Administration and the Veterans Administrations, and each has a different way of viewing credit scores. The FHA has changed their minimum credit score to 580. This means that you would only be required to have a 3.5% down payment. VA loans on the other hand are 100% financed and set aside for active and retired military. For these, there is no minimum credit score to qualify, however, the better the score, the better the interest rate.
A credit score is something that will determine your mortgage loan interest rate. Thus, the better the score, the better the interest rate. So, if your score happens to be between 620-639, your predicted interest rate would be around 5.7% on a $300,000, 30 year conventional mortgage. If your score falls between 760-850, then your interest rate would be around 4.1% on the same type of loan.
This is very important to learn about and take into consideration when wanting to buy a home. If you are afraid your credit score is not very good, and thus will affect you from getting a home loan, there are things you can do to improve it. You can ensure all your bills are paid on time, pay your credit balances and check your credit report on a regular basis to ensure there are no errors. Credit scores can play a major role in getting a mortgage loan for your house. It is best to be as knowledgeable as you can be, and learn different ways to improve your score to ensure you get the best loan and interest rate you can.