Are you hoping to purchase a new home? Before you start your search, it’s always recommended that you get pre-approved or pre-qualified for a mortgage. To get approval for a mortgage, one of the steps that you have to go through is a credit check. What kind of credit score do you need to buy a mortgage?
Credit scores range from 300 to 850 and are broken down into different categories from very bad to excellent. Typically, scores of 300 to 599 are considered very bad and scores of 800 to 850 are considered excellent. In the middle of these two ranges, scores of 750 to 799 are very good, scores of 700 to 749 are good, scores of 650 to 699 are fair, and scores of 600 to 649 are poor. Although it may seem impossible to get approved for a mortgage if you have a very bad credit rating, you should not give up hope.
Many people wrongly assume that you need perfect credit to get approved for a mortgage, but fortunately for buyers, that is definitely not the case. In 2016, most lenders will allow applicants to receive a FHA-backed home loan with a credit score of as low as 580. However, if you would like funding from a loan that is not backed from a government agency, then the minimum score increases to 620. The lower the credit score that you have, the more obstacles you will have to get over to get approved for a loan. To avoid the extra hassle, financial experts suggest aiming for a credit score of at least 740 before applying for a mortgage. This score is attractive to lenders and will help you get through the approval process much faster.
Real estate experts suggest that if you do have a lower credit score, you come prepared with a higher down payment. This will show the bank that you’re serious and make it seem like less of a risk for them to take since you will be paying more upfront.
Remember, this does not mean that you will instantly be approved for a mortgage as long as you meet these minimums. There are a number of different factors that go into an approval, and your credit score is just one part of the decision. However, if you do have this credit score, you have a better chance of getting your foot in the door.
It is also important to remember that there are exceptions to every rule. Even though these are the minimums to being approved for a mortgage, some lenders will make exceptions for clients who have extenuating circumstances. You should always meet with a lender to discuss what you can do to better your chances for approval if you are serious about investing in a new home.
Ready to find your dream home? Contact our team of real estate experts at Coast 2 Coast Realty who have years of experience assisting buyers in the Tampa area with their search.