Your credit score will certainly be an important factor in your mortgage application, but it isn’t the end-all, be-all.
While a high credit score will often make it easier (and more affordable) to get a mortgage, a lower one doesn’t dash your homebuying dreams entirely. In fact, there are actually some loan programs that allow for lower credit scores, as long as you meet some other requirements.
Are you preparing to buy a home? Want to make sure your credit will qualify you for a mortgage? Here’s what you need to know.
740 and above
Congrats! If you’ve got a score in this range, you’ll likely have no problem getting a mortgage. And with most lenders, you’ll probably qualify for the best interest rates too. That means a lower monthly payment and fewer long-term costs to boot.
660 to 739
Scores in this range are considered good by most lenders, and you should qualify for most mortgage loan programs out there, including conventional, FHA, VA, and USDA (though those last two have some other qualifications you’ll need to meet).
You should also be prepared for slightly higher interest rates than those seen by higher-credit borrowers. They shouldn’t break the bank, but they will be a few basis points higher to account for the added risk you present.
580 to 659
In this range, you should still be able to get a loan — but FHA loans (mortgages backed by the Federal Housing Administration) are likely your only option. As long as you meet other requirements, you can get an FHA loan with a 3.5% down payment and a credit score down to 580.
Keep in mind, though, some lenders may require higher scores than this, or they could ask for compensating factors — like at least 12 months of mortgage payments in savings, a particularly high monthly income, proof that you’ve paid similar or higher housing payments in the past, or anything else that can lower your risk as a borrower. You can also expect higher interest rates than the credit score buckets listed above.
500 to 579
FHA loans would, again, be your only option with a score in this range. There is a catch, though: While FHA technically allows for scores down to 500, you must make a 10% down payment if your score is less than 580.
Lenders can use their own discretion here, too, and many may not allow scores this low regardless of your down payment size. They also might require other compensating factors or assign an extraordinarily high rate to the loan to account for the risk.
You won’t be able to get a mortgage with a score under this threshold. If your score is in this range, your best bet is to spend some time increasing your score and reducing your debts. Once you get your score into a higher range, you can reconsider buying a home.
A credit counselor may also be able to help. These are professionals that can help you create a plan for tackling your credit issues.
Learn about your loan options
Need help with your homebuying goals? Want to learn what mortgage loans you might be eligible for? Get in touch with Premier Nationwide Lending today.
Premier Nationwide Lending is an Equal Housing Opportunity lender. Sponsored by NTFN, Inc. 6201 West Plano Parkway, Suite 100, Plano, TX 75093 | NTFN NMLS 75333.