What is the Best Credit Score for Buying a Home?
If you’re about to apply for a mortgage, your credit score is one of the most important factors in determining whether or not you will be approved. However, there isn’t a one-size-fits-all answer to figuring out the best credit score for buying a home. It really depends on what type of loan you’re getting. Here’s an overview of your options for buying a home depending on your mortgage of choice.
If you’re like most Americans and are looking for a conventional loan, you’ll need good credit. Because these loans are financed by private lenders, the individual organization will set the requirements. However, you can usually expect that you’ll need a credit score of at least 620 to qualify for this type of loan. Sometimes organizations will have even stricter requirements, such as requiring a credit score of 660.
If you have great credit and are going with a conventional mortgage, you will have even better options. For example, if you have excellent credit with a FICO score of 740 or higher, you won’t have to make as large of a down payment. You will also have lower, more desirable interest rates.
As their name implies, a jumbo line provides you with a larger amount of financing than other loans. Because of this, you will need exceptional credit to mitigate the large risk that the lender is taking. Typically, that means you should have a credit score of 700 or higher.
Because FHA loans are insured by the Federal Housing Administration, they are less risky for the lender. That means the credit requirements are less stringent. If you’re making a down payment that’s below 10%, you should be able to qualify for the loan with a score of 580. However, if you are able to make a down payment of 10% or more, you won’t have to meet any credit score requirements.
If you’re an active service member, veteran, or the spouse of someone who died in the line of duty, a VA loan is probably on your radar. They are insured by the U.S. Department of Veterans Affairs. Although the Department of Veterans Affairs itself doesn’t have a minimum credit score requirement, individual lenders still can choose a credit score minimum. Typically, you’ll need a FICO score of at least 620 to qualify for one of these loans.
The last option is a USDA loan. If you don’t have the best credit score for buying a home, this type of mortgage is for you. These loans are insured by the Department of Agriculture. Because they are meant to finance homes for low- and moderate-income individuals in rural areas, the credit score requirements aren’t as strict. Often, the minimum is 580, but, if you look around, you can probably find a lender that will accept you with an even lower FICO score.
Explore Your Mortgage Options with the Carolina Mortgage Team at Revolution Mortgage
As you can see, there are a wide variety of financing options for all kinds of credit scores. No matter what kind of credit you have, purchasing a home is often a stressful process, especially if it’s your first home. When you’re ready to take that big step, talk to the Carolina Mortgage Team at Revolution Mortgage. We will help you through the entire process and answer any questions you have as they come up.