Credit score needed to Buy a House
Your credit score affects your mortgage getting ability. However, a good credit score is required to get the loans at good interest rates but it doesn’t mean that less than average score will be a roadblock for you. You must know how much score is needed to purchase a home. This will help you improve the credit score so that you can become an owner of your dream.
What are the effects of credit score on mortgage rate?
The lenders consider credit score but this is not it as they also consider other things like debt-to-income ratio, down payment amount and savings. Your credit score also determines the payment terms and interest rate on which you get approval. In case, the score is less than the average score then lenders will consider it as risk-based pricing. It means, the interest rate will be high on a mortgage than those with a high credit score.
What is the required credit score?
However, there is no absolute answer for this but as per experts saying a 660 credit score will make you eligible to get a home loan. If your score is below this limit then you will get poor loan terms and high-interest rate. Moreover, to get qualified for FHA loan, the credit score should be 580 which is the minimum value. Many lenders assume the risk associated with the buyers with a low score using underwriters. If you can prove minimal debt or substantial savings to these underwriters then you can get a loan.
Categories of credit score
You can determine the worthiness or quality of the credit you hold by identifying where you belong in the categories. Here are the categories discussed. Poor- a poor credit score is somewhere 300-579 on which it is difficult to get a home loan.
Fair-a fair credit score will make you qualify for the loan. The score value lies 580-669 however the interest rate will still be high.
Good- if you hold a score of 670-739 then it will have some impact on the interest rate but it will not be very less. However, the rates can be somewhere 0.25-0.5 percent. This is the lowest rate available for a home loan.
Very good- a score with 740 and higher is considered as a very good credit score. This will keep the interest rates lowest and offer payment terms that are best in the market.
Ways to improve the score
In case you have a poor score then you can improve it using the given tactics. Monitor the report- if you keep eye on the report then you can easily identify the errors. Save up-put your savings to make a large down payment so that your loan amount gets reduced and to avoid unnecessary interest rates.
Hold off- don’t apply for a next loan until you get approval for the mortgage.Utilization ratio- debt to income ratio is also a factor so pay as much as of your debt to reduce this ratio.
Using these tactics will improve your score and you will get a home loan for buying a property in Florida.