If you are planning to buy a home, you are most probably thinking of obtaining a mortgage, and that inevitably must have made you think about credit score. Credit score is definitely one of the main things considered by lenders while deciding the terms of a mortgage. But there is a general misconception as well. A lot of people think that unless they have at least a decent credit score they cannot get a mortgage loan. Well, there are options available for people with imperfect scores as well.
But, before considering those options, what is an imperfect score? Are we talking about 400 or 550 or 660?
Normally, any score above 740 is considered excellent, and a score between 660- 740 is good. If your score is below 660 but above 600, it’s imperfect but still ok. Apart from factoring into the consideration if your loan will be approved or not, your credit score also plays a major role in determining the mortgage rate. A lender is much more likely to offer you low rate if your score is around 700 or above. Also, it may be enough for you to pay a down payment as low as 3.5%. And you’ll be able to qualify for a lot of loan options, so you can choose exactly what you want.
According to the rules, you can get an FHA loan even with a credit score of only 500, but in reality, lenders are less likely to offer you a mortgage in such a scenario. USDA and VA loans are some of the other options which can be considered if your score is low. A score of minimum 550 is probably safe bet for an FHA loan, but you’ll have to come up with a sizable down payment, maybe more than 10% and rates offered will be high.
It is best to check your credit score and records before you start shopping for a mortgage loan. And always remember, there are other factors as well which influence mortgage. Your income, assets, and employment history are some of the other things which are given due consideration.
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