Your credit score is a critical piece of the puzzle when it comes to qualifying for a home loan. It gives lenders an insight into your ability to make payments on time, pay back debts, and more. It’s also a factor that helps determine your mortgage rate. Typically, the higher your score, the lower the interest rates and better terms you’ll qualify for.
An article from Business Insider explains generally how your FICO score range can make an impact:
“. . . you don’t need a perfect credit score to buy a house. . . . Aiming to get your credit score in the ‘Good’ range (670 to 739) would be a great start towards qualifying for a mortgage. But if you’re wanting to qualify for the lowest rates, try to get your score within the ‘Very Good’ range (740 to 799).”
As FICO says:
“While many lenders use credit scores like FICO Scores to help them make lending decisions, each lender has its own strategy, including the level of risk it finds acceptable. There is no single “cutoff score” used by all lenders and there are many additional factors that lenders may use to determine your actual interest rates.”
If you’re looking for ways to improve your score, Experian highlights some things you may want to focus on:
Your Payment History: Late payments can have a negative impact by dropping your score. Focus on making payments on time and paying any existing late charges quickly.
Your Debt Amount (relative to your credit limits): When it comes to your available credit amount, the less you’re using, the better. Focus on keeping this number as low as possible.
Credit Applications: If you’re looking to buy, don’t apply for other credit. When you apply for new credit, it could result in a hard inquiry on your credit that drops your score.
When you’re ready to start the homebuying process, reach out to the Moving Greater Boston Team and we will be happy to connect you to a lender who will assess which range your score falls in and tell you more about the specifics for each loan type.
Source:
https://www.keepingcurrentmatters.com/2023/06/22/what-homebuyers-need-to-know-about-credit-scores/
https://www.quoteinspector.com/images/credit/credit-score-dial-gauge/
https://www.experian.com/
