Monday, October 3, 2016
Your Credit Score Matters
If you're considering getting a mortgage to buy a home, your credit score matters.
If it’s good, you should be able to get financing without a problem. If it’s bad, it can be difficult getting a mortgage at all.
What’s an acceptable credit score for a mortgage?
Most lenders look for a score in the mid 600's although they do vary in their requirements.
Credit reports with detailed payment habits determine a persons credit score based on:
⦁ Payment history (on time): 35%
⦁ How much debt you have: 30%
⦁ How long you've had credit : 15%
⦁ New credit you’ve taken on: 10%
⦁ Types of credit you have: 10%
Credit scores range from 300 to 850.
⦁ 740 to 850: very good
⦁ 670 to 739: fair
⦁ 580 to 669: low
⦁ 300 to 579: sub prime
Lenders have varying required minimum credit scores for a mortgage, which are key in determining a persons credit worthiness. That's why it’s important to know your credit score before shopping for a home.
Once you know your credit score, you’ll have a good idea of whether you’ll be approved for a mortgage. However, while a minimum credit score means you’ll probably get approved for a loan, you won’t get the best rate. A higher score will result in a lower rate or better terms. It also gives you leverage to shop for the best available rate and terms.
Some government insured home loan programs are much more lenient when it comes to credit scores. The Federal Housing Administration or FHA accepts mortgage applications with scores as low as 580.
Active or former military members may also qualify for a VA loan which will allow for lower credit scores, so it’s worth checking out if you qualify.
For more information on qualifying for a loan to buy a home contact me directly at 561-306-6736 or