What Credit Score is Needed to Qualify for a Home Loan?

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Filed under: Credit Issues

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Your credit score is one of the most important numbers that will impact your ability to buy a home. These three little numbers can make a big difference in your ability to qualify for a mortgage and more importantly, the the pricing and terms that are offered to you.  Here are a few details…

What do lenders want?

One of the first things that a lender will do is check your score. If it’s high, it will be easier for you to get the financing that you need for your home purchase or refinance.   If it’s low, you might still be able to qualify, but you could face higher rates or fees.

850 is considered a “perfect” credit score, but it is rarely ever seen.  A “top tier” credit score is 740 or above.  740 or higher will usually qualify you for the best terms a bank has to offer.

Range of Credit Scores

Lenders typically use these ranges for classifying credit scores:

• 740+ = Top Tier or Tier One
• 720 – 739 = Tier Two
• 700 – 719 = Tier Three
• 699 and below = Tier Four

The further down the range of credit scores, the higher the interest rate you will receive usually receive.  There are a few exceptions, such as government loans (FHA and VA) which tend to be slightly more forgiving with borrowers in tiers 2-4.  With conventional or jumbo financing, approvals are still possible in the lower tiers, but normally with higher pricing.

The bottom line is that a higher score will almost always save you money on your financing.

Preparing to Buy a Home

If you are getting ready to buy a home, then you should look at your credit score and put together a plan to improve that score.  Doing so will likely save you thousands of dollars.  Speak with an experienced lender about strategies that can improve your credit score.

If you have any questions or would like to discuss your personal situation, feel free to give me a call.

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