Buying a house is perhaps one of the milestones anyone would want achieve. However, it isn’t as easy as renting out a place. There is a lot going into the task. And one of the important things you need to check is the loan availability and the rate of interest. Your financial health plays a major role in achieving the dream of owning your own home. That is precisely where the concept of credit score comes to the fore. What credit score is needed to buy a house? We will check out in today’s post.
Does your credit score affect buying a home?
If you are looking to know if credit score affect buying a home – yes, it does. Whether you qualify for a mortgage or not or whether you can get a loan depends on your credit score to a larger extent. Your credit score is the key to determine if you will be able to repay the loan or default.
Your credit score is a result of a complex calculation. It involves the items in your credit report, your repayment schedules, the amount you owe and your repayment history. While credit score decides if you can get the loan, it can also decide the rate of interest you will get. So, if you are wondering with a credit score of 650 can I get a mortgage, this is the right place address your concerns.
Home loans are availed on a long term basis. Thus even 0.25 percent difference in the interest rate can help you save lot of money. And that is precisely why credit score is much important for you. It not only helps you get approved for your mortgage loan, but also helps lower your interest rates.
Is there a minimum credit score to avail home loan?
Well, that would be something dependent upon the state of economy and the housing market at the time of the loan. But still, there are a few pointers that can be helpful enough. The requisite credit score is largely dependent upon the amount of loan you are trying to get.
While the conventional loans need a credit score of at least 620, the requirement for the FHA loans is a lower 580. Different financial institutions have different guidelines and strategies. It also depends upon the risk taking abilities of the lenders and borrowers alike. In fact, credit score alone will not be a factor for getting a housing loan. Lenders will also have a look at other factors like your employment status, debt you may have and the down payment you have.
For a FHA loan, the higher credit score will help you get a rate of around 3.5 percent. In case of the lower credit scores, you may be charged at 10 percent. For a 650 credit score mortgage loan, we expect an interest of around 5 to 6 percent. However, it is completely dependent on the lenders to take a call. It also depends on how well they read your financial health. There are several other mortgage options for those with lower credit score. Ideally, with a 650 credit score mortgage requirement, home loan should be available at 3 percent down payment. The interest rate should lie at around 6 percent.
To sum up, these are a few credit score requirements that a few financial institutions would look for
- Conventional mortgages will look for a credit score of 620 or more
- USDA loans will need a credit score of 640 or
- If you are looking for a FHA loan, the credit score would be 500 with an interest rate of 10 percent. If you have a credit score of 580 or higher, you will get an interest rate of 3.5 percent.
- In case you are looking to apply under Veteran
Affairs quota, you don’t need to worry about credit score
That would answer your query very positively. Are you are looking for credit score of 650 home loan? The above discussion should clearly bring a positive news to you. A 650 credit score mortgage interest rate lies somewhere between 3.5 to 4 percent. However, we would also add that it will be dependent upon the exact scenario.
What lowest score can you have for availing house loan?
As illustrated above, you don’t need to worry about the minimum credit score if you come under the Veteran Affairs quota. For all other cases, you will need a minimum credit score of 500. Even for applying for a housing loan under the FHA scheme, you need to have a minimum credit score of 500.
If you do not meet the requirements, you may need to assign someone from your family as a co-applicant. It can be your parent, spouse or someone with a good credit score who is willing to co-sign your house loan request. Another option is to check out the options for improving your credit score.
How to Improve your credit score?
A 650 credit score home loan is very well possible as you have understood by now. If your credit score is less than that, here are a few options you can check out for improving your credit score.
Keep an eye on your credit report
Having a keen eye on your credit report can help you find any erroneous elements form it. This can be helpful in getting a better credit score. However, this can help you only if you have genuine errors in your credit report.
Make a large down payment
Making a larger down payment can help you reduce your loan amount. This can also reduce the amount of interest that may be charged to you. It can help you improve your credit score as well. It will also ease you of your financial burden.
Pay your Bills on Time
Pay your bills in time and in full. This should be applicable to all your credits. An good payment history will indeed increase your credit score. In fact, it will also assure the lenders that you are prompt with your payments.
Lower credit utilisation
Try paying off all your debts to the maximum possible extent. This will not only help you lessen the burden, but improve your credit score further. It will also assist you take care of your income to debt ratio as well.
Hold other credits
Your credit score takes a dip every time you take up a new credit. If you do not want your new mortgage loan to be rejected, hold off taking any new loans. This applies to a new credit card as well.
The Concluding Thoughts
We are focusing on the 650 credit score mortgage rate of interest. And we assume the above discussion has addressed most of your questions. In any case, you can share your thoughts with us if you want to chip in with your inputs on how to get better deals on a credit score of 650. This will help us enhance the horizon of our knowledge.