What Credit Score Do You Need to Buy a House in 2022?

 

 

Requirements can be strict for house buyers seeking to get a loan. The trick is knowing your possibilities and how to improve your credit score.

 

Credit Score to Buy Houses: Get Your Loan Even With Low Credit

Credit scores are an important measure for lenders in order to conclude (or not) a loan agreement. Based on the credit score of the potential borrower, alongside several other factors, lenders are able to identify whether it is safe to lend the money desired. Asking yourself whether your credit score is enough or not for getting the mortgage needed for buying your new house is an excellent question. We wrote this article in order to give you all the appropriate answers relevant to this topic.

In addition, AdvanceSOS’ founder and CEO, Nick Wilson, loan officer, and financial expert shared his best tips and advice on the topics discussed. You can find them at the end of our complete guide. We at AdvanceSOS are experts in the financial sector and in questions relative to loans, installments, credit scores. AdvanceSOS is the quick loan connection service with its easy application, founded to connect potential borrowers with legit lenders to get payday loans the same day.

In this article on credit score and house buying, we are going to cover topics such as: what should your minimum credit score be in order to buy a house and what are the most common types of mortgage loans.

 

Credit Score and Buying a New House

We understand it, the FICO score is crucial in the homebuying process. Not only because it dictates whether you qualify for a loan or not, but also because it impacts the terms of the loan itself. This credit score varies depending on the loan type agreed on, but general information is to be aware of.

Even though a flawless credit score is not required, the minimum needed should be at least 620. The higher this value is, of course, the better your chances of getting approval will be. Statistically speaking, there are very few cases of approved loans with a credit score under 650. With credit scores this low, the data says, you will clearly get higher interest rates compared to applicants with FICO scores of 740 or higher.

To add to this, the COVID-19 situation greatly influenced the finance market. Nowadays, lenders have generally raised the minimum credit score they require because of much instability, which they need to counterbalance with higher security coming from those who borrow from them. Nick Wilson, our founder and CEO, has recently conducted research precisely on these topics and is willing to share his best advice at the end of the article. Therefore, if you are interested in knowing how to strengthen your credit score, that is where to find the answer.

 

Credit Score Minimums by Loan Type

Let’s now analyze how the minimum credit score can vary depending on the type of loan you ask for.

 - Conventional loan: 620.
This is the most common loan and one that you will find quite easy to get approved if your credit score is relatively low. As previously mentioned, however, according to the ICE Mortgage Technology, these mortgages often require higher FICO scores (>740). In addition, conventional loans might need other requirements to be satisfied, such as high income.

 - Federal Housing Administration (FHA) loan: 500.
For potential borrowers whose score ranges between 500 and 600, the advised home loan is the one insured by the FHA. We can distinguish two groups: if the credit rating is lower than 580, the borrower is requested to make a 10% down payment; if, instead, it is higher, then the down payment can even be about 3.5%.

Remember, however, that we are talking about minimums. The data available in 2022 show that the average FICO score for homebuyers who got their FHA loan accepted was about 670. Lenders can always impose, for their safety, their own minimums.

 - Veteran Affairs (VA) loan: about 640.
The Department of Veteran Affairs is a branch department of the federal government of the US charged with dealing with matters related to eligible veterans, their healthcare, and other life-long services. If you are a veteran, an active member of the military currently on duty, or a spouse, the Department guarantees mortgages, or VA loans, to you. There is not a precise minimum score as a prerequisite, instead it is decided by the lenders.

 - US Department of Agriculture (USDA) loan: 640.
Another help in terms of mortgages comes from the US Department of Agriculture, which backs those willing to move to rural areas but have a low or moderate income. As in the case of VA loans, USDA loans don’t have a required minimum score, but such credit rating is set by the lenders themselves.

 - Jumbo loan: 700. The last mortgage loan type for homebuyers we are covering are jumbo loans, that is, those mortgages that exceed the conforming loan limit. Because of the risk of lending a significant amount of money, as is the case for jumbo loans, lenders ask for a quite high credit score. If yours is higher than 740, your chances of getting the best jumbo rates are very positive. In general, a good, stable financial situation is required in order to be eligible for approval.

 

Tips to Strengthen Your Credit Score to Buy a House

Now that we have covered the most important things you should know about credit scores, here are a few quick tips to help you in bettering your credit rating.

 - Request a copy of your credit report: it’s free, and by checking it you can detect and correct any inaccuracy or wrong/missing information.
 - Try to keep your credit utilization ratio (amount of debt/amount of available credit) below 35 percent, because that is what lenders like to see.
 - Avoid late payments, they stay on your report for seven years. Pay your bills in time!
 - Don’t close old credit lines, nor open new ones. The former, because it might increase your utilization ratio, and the latter because each credit request lowers your credit score.

 

 

About the Author

Amanda Girard is the financial copywriter at AdvanceSOS. She can put her knowledge at work through easy-to-read, concise articles and blog posts on everything related to loans and the financial world, about which she has significant expertise. Since our founding in 2019, she has written the most comprehensive yet exciting pieces for our company, and she is not going to stop any time soon.

 

 

 

Original

Credit scores are an important measure for lenders in order to conclude (or not) a loan agreement. Based on the credit score of the potential borrower, alongside several other factors, lenders are able to identify whether it is safe to lend the money desired. Asking yourself whether your credit score is enough or not for getting the mortgage needed for buying your new house is an excellent question. We wrote this article in order to give you all the appropriate answers relevant to this topic.

We at AdvanceSOS are experts in the financial sector and in questions relative to loans, installments, credit scores. We are able to offer our clients the necessary help and support thanks to the combination of years of experience in the sector and the knowledge gathered through constant training. In this article on credit score and house buying, we are going to cover topics such as: what should your minimum credit score be in order to buy a house and what are the most common types of mortgage loans.

In addition, AdvanceSOS’ founder and CEO, Nick Wilson, one of the best loan officers and financial experts, shared his best tips and advice on the topics discussed. You can find them at the end of our complete guide.