Most people know that their FICO® score plays a significant role in the home-buying process and in obtaining a mortgage. Many home buyers have questions regarding what exactly is required to get the loans they need.
There was an announcement from CNBC that the average national FICO® score has reached an all-time high of 706. The good news for potential buyers is that you don’t need a score that high to qualify for a mortgage. Let us take a look at the credit score myth so you can become a homeowner sooner than you may think.
At this time, we are seeing low interest rates and many people believe now is a great time to buy – they are correct! Fannie Mae recently reported that 58% of Americans surveyed say it is a good time to buy. Similarly, the 2019 HOME Survey by the National Association of REALTORS® stated 63% of people believe now is a good time to buy a home.
This is great news, as it means Americans are improving their credit scores and building toward a stronger financial future, especially after the market tumbled during the previous decade. With today’s strong economy and increasing wages, many Americans have had the opportunity to improve their credit over the past few years, driving this national average up.
Unfortunately, fear and misinformation often hold qualified and motivated buyers back from taking the leap into home-ownership. If you want to own a home, speak with a loan officer or financial advisor and they will let you know if you can qualify to purchase a home and the different types of loans available.
FHA Loan: FHA
loans are ideal for those who have less-than-perfect credit and may not be able to qualify for a conventional mortgage loan. The size of your required down payment for an FHA loan depends on the state of your credit score. If your credit score is between 500 and 579, you must put 10% down. If your credit score is 580 or above, you can put as little as 3.5% down, however you may put down more if you desire.
Conventional Loan: It’s possible to get approved for a conforming conventional loan with a credit score as low as 620, although some lenders may require a score of 660 or better.
USDA Loan: While the USDA doesn’t have a set credit score requirement, most lenders offering USDA-guaranteed mortgages require a score of at least 640.
VA Loan: As with income levels, lenders set their own minimum credit requirements for VA loan borrowers. Lenders are likely to check credit scores as part of their screening process and most will set a minimum score, or cutoff, that loan applicants must exceed to be considered.
As you can see, plenty of loans are granted to buyers with a FICO® score that is lower than the national average.
Please contact one of our agents if you would like to learn more about how you can purchase your own home.
