What Credit Score Do I Need to Get Approved For A Home Loan
Have you embarked on the exciting journey of finding a new home? If so, chances are, you’re going to need to apply for a home loan. Let’s face it: the majority of people don’t have a wallet full of cash ready to pay for the price of their new home in full. And that’s why we have home loans.
When you’re anxiously awaiting the approval of your loan application, the biggest deciding factor is what type of credit score you possess. Fiscal responsibility is something banks don’t take lightly. After all, they want to be relatively certain that you’ll make on-time payments and eventually, pay the loan in full.
If you’re worried about your current credit affairs and wondering whether or not they’re sufficient enough for a home loan, keep on reading below!
What Type of Loan Are You Applying For?
According to a credit repair Dallas company, it’s no secret that your credit score is incredibly important in determining your eligibility for a home loan. However, there is some wiggle room on what qualifies as acceptable depending on the type of loan you are looking for.
Keep in mind:
Prior to the economic crash of 2008, it was leaps and bounds easier for someone with a low credit score to receive approval for a loan.
Unfortunately, the times have changed, and our current economic landscape demands higher credit scores in order to get your application approved.
Here is a breakdown of the kinds of loans and the credit scores typically required, as provided by the Lenders’ Network:
- FHA Loan – 580+ credit score (500-579 score is possible but unlikely)
- VA Loan – 620+ credit score (some lenders require 580)
- USDA Loan – 640+ credit score
- FHA 203K Loan – 620+ credit score
- Conventional Loan – 620+ credit score
What Is the Lowest Score You Can Have?
While you may be concerned about your poor credit standing and the fact that it may obstruct your ability to qualify for a loan, you can probably obtain an FHA Loan. For this kind of loan, you can have at minimum a score of 500, as long as it’s accompanied by a 10% down-payment. If you have a score greater than 580, some banks offer as low as 3.5% for the down-payment.
How to Boost Your Credit Score
The renters’ market has been on a rise for some time now. Whether it’s due to personal preference or because you have a low credit score, you may think owning a home is not in the cards.
The thing is, though; is that you can have a lower score than you thought that you could. With a 10% down-payment, you can have a relatively low score and still be able to qualify for a loan.
If your score does disqualify you, then it’s suggested to look into ways to boost your credit score. You can work on paying off your debts, as well as obtaining a credit card and making consistent payments, to help increase your credit score.
Leasing a car is also an effective way to boost your credit score - again, as long as you make your payments on time.
It’s virtually everyone’s dream to own a home. You probably have a style preference and spend your nights scrolling through Pinterest in search of inspiration for your interior design. You shouldn’t close the door on the future you envision for yourself just because you possess a low credit score. Instead, do your research and get clear on what your current score is so that you can apply for the right kind of home loan and start building your future.