Editor’s Note: This question comes from Gail on Facebook and we answer it as part of our “Ask Susie Q&A” Series. If you have a question for us, ask us on Facebook or Twitter and we may pick yours to answer.
Working at Experian, I often get many variations of this question:
- What does my credit score need to be to get approved for a home loan?
- What credit score is required to get a mortgage?
The short answer is: It depends. Lenders are going to look at a lot of other data to make their lending decision, such as your income, employment status and how much cash you are bringing to the table for a down payment.
If you want to qualify for an FHA-insured mortgage, sometimes called a conventional mortgage, you will typically need credit scores of about 680. (Typically, the credit scores that mortgage lenders use to approve a mortgage loan have a range of 300-850.)
If you aren’t quite where you want to be with your credit scores, there are options:
1. Wait and Keep up Your Good Credit Habits
Good habits, such as paying your bills on time and not maxing out your credit can help improve your credit scores. You can get your free credit report and FICO® Score from Experian to see where you’re at and keep an eye on things.
2. Take Advantage of Government Programs
If you are a first-time homebuyer, there are a slew of government programs aimed at helping first-time homebuyers get a mortgage, often with very favorable terms. With many of these programs, you don’t need sparkling credit scores. Programs may vary by state, so check with your state to see what’s available. About 640 or so is what is typically needed to qualify for a first-time buyer assistance. You will likely have other criteria you will need to meet.
3. Jump Online and Do Some Research
There are lenders offering loans to borrowers with lower scores. Spend some time researching, and be extra careful when reviewing all the terms and conditions. Lenders taking on what they view as more risky loans—meaning loans with a higher possibility of default—usually need to make up for the potential losses from loan defaults by charging more for the loan.
Expect a higher Annual Percentage Rate (APR) and/or higher fees, ask a million questions and make sure you understand all the costs, terms and conditions associated with the loan.
Last but not least, a mortgage is a huge commitment. Be 100% sure you can afford the mortgage payments before you take the plunge into homeownership.
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