When buying a house, having a good or bad credit score will affect you in certain ways. If you want to get a mortgage loan, the conditions of it will depend on your credit score. This is important because the type of mortgage loan you get will define how much money you will pay in the future for the place you are living in. In this article, we will explain what credit score you need to buy a house in 2018.
Why is my credit score important when buying a house?
Mortgage lenders ask for certain requirements when someone wants to get a loan. The credit score is the most important one among those requirements, because it will let the lender see how probable you are to pay for the loan responsibly in the future.
Having a good credit score will not only mean that you will get a mortgage loan approved, but it will also influence other aspects. The better your credit score, the less you will be asked to put in the down payment. Also, you will be able to get better interest rates, which means you could save thousands of dollars in the following years you will pay for the loan.
Is the credit score the only thing considered?
Although your credit score will be the main thing mortgage lenders will look at, it is not the only aspect they will consider. They will ask for certain documents, like bank statements, they will check you employment situation, they will look at your debt, they will check your DTI and they could even consider the house you are going to buy.
In case you have bad credit, if you have enough “compensation factors” you could still be able to get a loan. These factors could be a high income, a high down payment or a large amount of money in savings.
What credit score do I need to buy a house in 2018?
The credit score you need to buy a house in 2018 depends on the type of mortgage you are getting.
- Federal Housing Administration (FHA) Loan: In theory, you can ask for a loan with a credit score of 500 to 579 with a down payment of at least 10%. However, it is really difficult to get it if you don’t have a credit score of at least 580. Credit scores of 580 or more qualify for FHA’s minimum down payment of 3.5%.
- Conventional Loan: 620 of credit score or higher. You could still get a loan if there are enough factors that compensate a credit score under 620.
- USDA Loan: 640 of credit score or higher.
- VA Loan: There isn’t a minimum credit score for VA loans, but as VA lenders are not required to follow credit score requirements of VA, they usually ask for a credit score of at least 620. However, you could still get a loan if you are below that.
- Non-Prime Products: These are alternatives for people with bad credit score as they have the lowest credit score requirements. They usually ask for a credit score of 500 or higher, but some of them may even require only 300 of credit score or accept people with no credit score at all.
What happens if I do not qualify?
If don’t have the credit score you need to buy a house in 2018 and you don’t have enough compensation factors you should start improving your credit score. To do it, pay your bills on time, don’t exceed 30% of your limit, check your credit card reports regularly and become an authorized user of someone who has a credit card with good credit score.