There are rarely hard and fast requirements for a credit score when it comes to getting approved for a loan. A higher credit score will result in more favorable loan terms, such as a higher loan amount or lower interest rate. A lower credit score may require a higher down payment or a higher interest rate.
Start by evaluating your financial situation. This means reviewing your income, savings, expenses, and debts. Creating a detailed budget will help you identify how much you can afford to spend on a home without compromising your financial stability. Importantly, check your credit score, as it plays a pivotal role in determining your mortgage eligibility and interest rates.
If your credit score is 620 or higher
You’ll be able to apply for a conventional mortgage, as well as other mortgage programs that work for you, such as the VA loan or the FHA loan. Lenders like to see a credit score of 620 or higher because it means that you have a strong track record of paying your bills on time.
If your credit score is at least 580
You can qualify for the VA loan or the FHA loan with a slightly lower credit score but expect to pay a higher interest rate. As your credit increases, you might be able to refinance in the future to take advantage of lower rates. Keep in mind that interest rates do change over time, so future rates won’t necessarily be lower.
If you do have a lower credit score, talk to your lender about programs that you may qualify for as well as other factors that may help your application. For example, if you have a large down payment, they may be willing to work with a lower credit score. They are still required to follow lending regulations, however. One of the best ways to put yourself in the best position to get a mortgage is to maintain a good credit score.
