As many as16% of Americans have a low credit score. This may worry those who are trying to secure a mortgage for a house purchase or refi, as there are often certain credit score requirements that must be met. However, there are ways around bad credit when it comes to buying a home.
Having a high credit score shows a lender that you can manage your debts and that you are responsible with money. This goes a long way in qualifying for a mortgage, but whatever your credit score, there may still be a way for you to get approved for a mortgage.
Find out what your credit score should be to buy a home below.
What Does Your Credit Score Measure?
Your credit score measures several important parts of your financial history. Mortgage lenders look at these components carefully to determine if you will be able to pay your loan back responsibly.
Your credit score will show your current loans and how much you have left to pay back. You can still get a mortgage if you already have other loans. Your lender will simply check if you have been paying your loans back regularly and that you don’t have any serious debt.
Your credit score also measures your new and old credit plus the amount of credit you already have. This shows whether you have been able to make regular credit payments on time. This is a good way for a lender to analyze if you will be able to afford mortgage repayments.
What is Considered a Good Credit Score?
The answer to this question depends on the type of mortgage loan you decide to go for. Several are available, and some require a higher credit score than others. However, a general score of at least 620 is normally required for a purchase or refi mortgage.
Conventional
Conventional loans are a fairly standard type of mortgage. A credit score of 620 is required to secure this type of loan.
VA
These kinds of mortgages extend to those who have served in the armed forces (or your spouse has). Not all lenders offer VA mortgages, so ensure you ask before you apply.
REVERSE
REVERSE loans are available for people aged over 62. They are ideal for those considering retirement and generally don’t require income or credit testing.
FHA
First-time homeowners will benefit from FHA loans. The Federal Housing Administration insures this kind of loan.
HARP
HARP stands for Home Affordability Refinance Program. It is designed for struggling homeowners who wish to refinance their mortgages.
USDA
A USDA loan is also great for first-time home buyers or those who are on a lower income but still wish to own their own homes. USDA loans don’t require a minimum credit score, so they are ideal for those with a poor credit history.
What Score Will I Need to Buy a House?
Generally, a credit score of 620 is the minimum score needed to get a mortgage. However, as noted above, some loans are designed especially for those with lower credit scores, making it easier for them to secure a mortgage.
Where is the Best Place to Check My Credit Score?
There are specialist, secure websites online where you can check your credit score. The USAGov website is one place you can check. Equifax and Experian can also be used to check your credit score online.
Your credit score is free to check from most websites that offer this service. Some will provide a more in-depth analysis of your credit for a small fee, but purchasing this is optional.
If My Score is Too Low, Can I Still Get a Mortgage?
Yes! You can still get a mortgage if you have bad credit. Many lenders have specific mortgage types available for those who don’t have the highest credit scores.
It is advantageous to have good credit when applying for a mortgage because it could allow you to secure a bigger loan. This means a wider range of options will be available to you on the housing market.
How Can I Improve My Credit Score?
There are many easy ways to improve your credit score. One of the most common is to take out a credit card. Use this for small purchases and pay it off immediately.
This helps to build your credit and shows that you can handle repaying money responsibly. Never let debt rack up on a credit card, as this can damage your credit hugely.
Another very simple way to improve your score is by simply ensuring your information is correct and up to date. Something that doesn’t correlate between your personal information and any checks that have been carried out, such as an incorrect address, can lower your credit score.
What Could Negatively Impact My Credit Score?
As a result, not paying any loans back and getting into serious debt could negatively impact your credit score. Always ensure you can pay back any loans you take out based on your income.
Mistakes in your credit score are quite common and could contribute to a low score. If you feel your score is lower than it should be, take a closer look at your score to see if any of the information is incorrect.
What Might My Mortgage Lender Consider Before I am Approved?
Your mortgage lender may look at your credit score, your income, and what your regular spending habits look like. All these components show your lender that you are acting carefully with money and will be able to pay your mortgage back in full.
Talk Through Mortgage Credit Score Requirements Today
It’s important to consider your credit score requirements before applying for a mortgage. Understanding the score you need and making changes to improve your current score could make the mortgage application process much less stressful.
Don’t be discouraged if your score is low! There are plenty of ways to boost it with just a few simple changes. You can also discuss low credit score mortgage options with your lender.
If you wish to talk through your mortgage options with a friendly team,contact us today.
7th Level Mortgage is a leading one-stop mortgage company providing deeply informed, custom-tailored assistance with each mortgage transaction phase. If you are searching for a home loan in New Jersey, Pennsylvania, Delaware, Maryland, New York, or Florida, please contact us today so that we can determine the best Mortgage Lender to place your loan with and get you the best possible rate and program.