If I want to buy a home, how high of a credit score do I need?
Everyone is talking about the American economy crisis these days: What went wrong, who is to blame and how can we mend the problem?
Basically, it comes down to irresponsible, greedy people who gave too much trust to unqualified loan applicants in order to make some fast money. As a result of this fiasco, there’s a lot less trust to go around when you go looking for a mortgage.
Back in the days when bankers were busy creating this increasingly dire economic crisis, your credit score, if above a certain mark (around 620-650 by most estimates) ensured you both qualified for and received interest rates on the money you borrowed.
Times were good back then. Getting approved was quick and easy. Loan officers did not probe carefully or too deeply in to your financial or credit background. So long as you had that minimum credit score, your next move was to decide on new carpets.
I reminisce over all of this to emphasize how things have changed for you, the Prospective Homeowner. That minimum score of 620-650 is no longer the pass to owning a home like it was before.
While scores in these ranges may still constitute an approval, it’s typically a much less desirable one, requiring more money at closing, in fees and over the long term of the loan in interest rates. To be excused from these expensive options, your credit score will need to find its home in the 720-750 range.
As I mentioned, lenders increased these problems by extending too much trust. Trust is still obtainable, but only after great judgment of a variety of financial information on your loan application.
If you want to be approved for a mortgage with reasonable rates, you should examine your credit report and fix any problems. Credit reports can contain errors or information which can be deleted, with a little effort.
By having a nice sized deposit you show your commitment to own a home. Finally, creditors will review your debt to income ratio. You can improve this by paying more on your debts, earning more money, or ideally both.
So, it is important to understand having a certain credit score is not the only factor you will need for getting into your new home. Times are skimpy, trust is minimal and scrutiny is outrageous. You can improve all the factors involved with a little time and effort. Being a home owner is still a great goal and we wish you the best in your efforts.
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Topics: how to, credit tips, business and finance, business