The Ideal Credit Score That Allows You To Buy A Texas House
If you’re not well conversant with the real estate industry and beginning to think of purchasing a home, it’s good you know that your credit score can affect your ability to get a mortgage. Though it doesn’t mean the world, a good credit score is vital. It boosts interest rates and improves loan terms. However, it doesn’t mean that you need perfect credit in order to own a home. There’s much still hope.
Knowing everything, in terms of the impact your score has on your mortgage rate, you’ll be able to grow your credit in advance before you proceed to own a home.
How Does Your Credit Score Affect Your Mortgage Rate?
Let’s face it! Before a lender settles on a decision of approving you for a mortgage, he/she must consider your credit score. Moreover, they put into consideration your accumulated savings, debt-to-income ratio, and the amount of money you readily have available to give as a down payment.
Your scores go beyond determining whether you’re eligible for a mortgage. The interest rates and payment terms you get are largely influenced by your score. A credit score ranging anywhere from 650 to 699 – which is below average – means lenders may bring in risk-based pricing while stating details regarding your mortgage.
In order to cancel out the perceived risk of having to deal with a borrower whose credit score is low, a lender may take the step of increasing the mortgage rate. What does this mean? It means a credit score of 650 is likely to get a higher interest rate than a credit score of 720. This could cost you a fortune more throughout the life of your mortgage.
What’s The Required Credit Score To Buy A House?
It’s estimated that with a score of 660 you’ll probably qualify for a home loan. Though it’s not certain. On the other hand, scores of 660 and below, means you have to deal with a high-interest rate and poor loan terms.
With a minimum credit score of 580, you qualify for an FHA loan. 3.5% of your purchase amount goes to the down payment. However, you’ll be good to go in case of an underwriter intervention. The underwriter assumes the financial risk, and may only require you to carry minimal debt and prove to have a significant amount of savings.
At the moment, the average American’s credit score is 695. That’s relatively high. In case you desire top-level rates, focus on reaching a credit score of about 740 before even thinking of how you can apply for a mortgage.
- With a credit score of 620 or higher, you’ll comfortably work with conventional mortgages.
- A credit score of 640 or higher is needed for USDA loans.
- No minimum credit score is necessary for Veteran Affairs loans.
You can use any of the interactive features on our website or call us anytime to speak to a diligent mortgage professional directly. We hope to work with you soon! Click here to go to the second article in this series.