Your credit score is important when it comes to buying a house. But what kind of credit score is necessary to qualify? It turns out that it depends on the type of mortgage you get.
Credit Score Required for a Conventional Mortgage
The most common type of mortgage is called a conventional mortgage. It doesn’t have any special requirements like a VA loan or USDA loan does. But there are a few criteria that determine if someone will qualify for this type of mortgage.
One of those criteria is a credit score of at least 620. This falls right in the middle of what’s generally considered the “Fair” category of credit.
Keep in mind that just because you have a score of 620 doesn’t mean you’ll automatically qualify for a mortgage. Other things come into play such as your debt-to-income ratio or if you have a down payment of at least 20%. You may won’t get the lowest rates available either. To get the best rates, you will probably need a higher score.
Even if you don’t have a 620, don’t worry about it. There are other loans available, such as an FHA loan.
What Credit Score Do You Need for an FHA Loan?
FHA stands for Federal Housing Administration. To help U.S. citizens be able to buy their own homes, they created a type of mortgage called an FHA loan. It’s generally a bit easier to qualify for an FHA loan than a conventional loan.
For example, your credit score needs to be at least 580 instead of 620. While that may not seem like a big difference, keep in mind that a 580 is the very lowest rung of the “Fair” category. If your score dropped to 579, your credit score would be in the “Poor” category, meaning you’re seen as a higher risk for creditors to extend a loan to you.
How Do You Increase Your Credit Score?
Are you struggling to reach that 580 mark for an FHA loan? Or maybe you want to get a conventional loan instead, so you need a score of at least 620? If that’s the case, there are a few things you can do to start increasing your score.
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