Of all the negative surprises that 2020 brought us, one surprise proved to be a light at the end of an otherwise dark and dismal tunnel – mortgage rates fell to the lowest they’ve been in decades. Consequently, you may be trying to figure out if your credit score is enough to qualify for a home loan, especially one that has a lower interest rate. In addition to not being aware of their credit score. Many prospective home buyers feel that mortgage loans require having a higher credit score than what they actually do. However, it does help to ask and check if your credit score will get you the mortgage you are looking for.
How is Your Credit Score Determined?
It goes without saying that credit reporting agencies rely like it when you pay your bills on time. Although this has the most impact (35%) on your credit score, there are 4 other factors that play a role in determining it as well including:
- 30% impact – balance-to-limit-ratio (available credit lines vs. credit account balances)
- 15% impact – credit history; length of time your accounts have been active
- 10% impact – types of current open credit accounts
- 10% impact – new credit inquiries (doesn’t include “soft inquiries” such as when you check your own score)
This is a good time to review your credit report and download FREE copies of it from Equifax, Experian, and TransUnion. If you find any errors, file a correction request. Keep in mind that these reports don’t list your FICO score. However, it is available for a fee (average cost is $20).
Different Loans, Different Scores
Our goal is to see more individuals become homeowners. Consequently, we offer a broad range of mortgage options including Conventional, FHA, USDA, and VA loans. Although prospective home buyers should try to have a 760 or higher credit score to ensure getting the best interest rate, this isn’t always possible. Here is a breakdown of minimum credit score requirements for the 4 types of home loans mentioned above:
- Conventional – 620
- FHA – 580 (3.5% down payment) / 500 (10% down payment)
- USDA – none required, although most lenders look for a 640 score or higher
- VA – none required, although lenders prefer 620 or higher
There is also the Jumbo loan which is a loan that exceeds the FHA’s maximum loan limits and aren’t Fannie Mae or Freddie Mac insurable. Since lenders have more risk with Jumbo loans, they look for a minimum credit score of 680.
To learn more about minimum credit score requirements, contact Front Range Mortgage at (303) 500-1900 in Denver and (719) 540-2020 in Colorado Springs. We are here to help you get the right rates and best mortgage. Call us now!