It’s a crucial question for everyone who dreams of owning a house. And here at Maine Source Homes & Realty, we’ve heard it asked many, many times. Folks dreaming of buying a house will ask, “What about my (or our) credit score? How will that affect my dream of becoming a homeowner?”
What they’re really asking is, “Can I qualify for a home-mortgage loan?” So let’s take a few minutes to focus on this question, and the specific factors that will determine the answer for you and/or your family.
Unpacking the Mysterious Credit Score
First, it’s important to understand that several factors impact your ability to get a mortgage. These include things like your employment history (including how long you’ve been at your current job); your current debt-to-income ratio; and how much money you have available as a down-payment. But the #1 factor in determining your loan eligibility is typically your credit score.
You may not realize that there are actually a few different types of credit scores. The score used by mortgage professionals—the folks who will either give you a thumbs-up or a thumbs-down—is called your FICO score. It ranges from 300 to 850, with the range broken into categories designated from “Poor” to “Excellent.”
What FICO Credit Score Do I Need?
The minimum credit score you’ll need to buy your house is determined by the lender—and different lenders have different criteria. The Lenders Network has published research revealing that, in general, the minimum credit score you’ll need to get a mortgage from various lenders is as follows:
- FHA Loan . . . 580+ credit score (although sometimes ranging as low as 500)
- VA Loans . . . 620+ credit score (although some lenders require just 580)
- USDA Loan . . . 640+ credit score
- FHA 203K Loan . . . 620+ credit score
- Conventional (i.e., from a bank) Loan . . . 620+ credit score
The good news is, even if you have a credit score of (for example) 580, which is considered “Poor,” you may still be able to quality for a home loan, although an FHA Loan will be your only option. Many FHA Loans permit down-payments as low as 3.5 percent, although you’ll generally pay more in the long-run due to FHA mortgage-insurance requirements.
Let Maine Source Homes Help You
Improve Your Credit Score
If it is determined that your FICO credit score is “Poor” or “Fair,” you’ll probably want to improve it before applying for a home loan. That’s where Maine Source Homes & Realty can offer you invaluable assistance.
How? Well, if you’re confused by all this talk of credit scores, mortgages, and banks, we can be in your corner to clarify things for you and give you a clearer, easier path to securing a mortgage. We take the time to educate you about each of the steps toward home ownership, by offering credit counseling, showing you your lending options, and helping you obtain your loan. As we often say, “We’re in the business of making home buying stress-free and uncomplicated.”
And we’d love to help YOU that way!
ABOUT MAINE SOURCE HOMES & REALTY
MAINE SOURCE HOMES & REALTY is dedicated to helping you find your perfect home-ownership solution. Whether you wish to buy, sell, or build a home, Maine Source Homes & Realty invites you to benefit from our 46 years of trustworthy experience and expertise.