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What Credit Score Do I Need As a Homebuyer?

July 15, 2020

Your credit score is a vital number when it comes to the homebuying process. It will dictate your ability to get approved for a loan, your intertest rate, and, in certain circumstances can qualify you for certain purchases. This prompts the common question: What credit score do I need when buying a home? For some, it may even bring up the question, what steps do I need to take to improve my credit score? Find the answers to these questions and more below!

What Credit Score Do I Need As a Homebuyer?

The majority of lenders have a baseline credit score that they use to determine whether or not to accept a mortgage applicant. For many lenders, this baseline is Quick read more or view full article 680—and that is the lowest you want to have when applying for low interest rate. If you are hoping to get a really great loan and interest rate, a score in the 700's is what you want!

For most lenders, 700 and above is fantastic and will open up many poential doors for you, where as a score of 680 is considered adequate. If the credit score is anything lower that 660, that is when the buyer will run into trouble: high interest rates and possible rejection.

When a lender takes you on and gives you a mortgage, they want to know that you are good to pay it back. The higher your credit score, the more trustworthy you will seem to the lender.

Note: This information relates strictly to conventional loans. There are other ways to attain a mortgages, such as a Federal Housing Administration (FHA) or a VA-backed loan. These methods do not require as high of a credit score and many will work with you even if your score is lower than 500.

What If I Have Bad Credit? Can I Still Buy a House?

For those whose credit score has dropped below the 500 mark, there is still an option avaialble: a subprime loan (aka 'bad credit home loan'). Many subprime loans have significantly higher interest rates than the options listed above (aka Prime Loans), and can have additional fees attached.

The option for homebuying is still open to you, however it will end up costing far more than it would if you had a good credit score and go with a conventional loan.

How to Improve a Bad Credit Score?

A credit score is not set in stone, and therefore, improving your credit score is do-able! One of the simplest remedies is to track your financial habits and make sure you are paying everything off on time (credit cards, student loans, car loans, ect.. ). See if there is anything you can pay down and/or try to settle any discrepincies found on your credit history.

There are many sites that will not only help you find your credit score, but will also give you tips on how to improve it. or are great options!

Bottom Line

It is recommended to step back and take the time necessary to build up your credit score before applying for a loan. Not only will get better rates, but you will also save a lot of money in the long-run.

Note: For those that cannot wait and have to purchase with a bad credit score, refinancing is always an option in the future.

As you can see, this number will dictate a lot of your opportunities as a homebuyer. Start by checking your credit score and depending on what you discover, talk with a lending agent to find out your next step in the pre-approval process.

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