For most types of loans, a credit score of at least 620 is necessary to buy a home. However, a higher score significantly increases your chances of approval, as borrowers with scores below 650 make up only a small fraction of closed-end purchase loans. The minimum credit score for obtaining a mortgage is 580, which is considered “fair.” With a score of 620 or higher, you have access to most home loan programs. A credit score of 720 is an excellent rating.
The good credit range includes scores from 700 to 749, while an excellent credit score is 750 to 850. People with such high scores are in a great position to qualify for the best possible mortgages, car loans, and credit cards. It's always beneficial to improve your credit score before applying for a mortgage to get the best terms. One of the best ways to increase your credit rating is to identify any outstanding debt you owe and make payments on that debt until it is paid in full.
Because the minimum rating for conventional loans is 620, this can mean the difference between qualifying for a mortgage and not qualifying for one. Similarly, if you've had credit problems in the past, such as bankruptcy or short selling, it's still possible to buy a home. While it's possible to buy a home with fair credit, you'll get a lower mortgage rate and better loan terms with a higher score. If your score is lower than 620, lenders will not be able to approve your loan or they will be asked to offer you a higher interest rate, which can result in higher monthly payments.
Rocket Mortgage is not a financial advisor, so it's best to consult a professional to help repair your credit. You should start checking your credit early on, ideally six to 12 months before you want to buy a home. Keep track of your credit, make timely payments, and get help choosing the mortgage loan that's right for you. Your credit score is an important factor in determining if you will be approved for a mortgage.
Mortgage insurance protects lenders by allowing them to lend to borrowers with lower credit scores and smaller down payments. However, many people don't know where they stand, considering that 44% of consumers have not verified their credit rating in the past 12 months according to the National Foundation for Credit Counseling. Alternatively, if you don't have time to correct your credit score, it might be worth looking for one of the best credit repair companies to do it for you. It's one of the things you need during the mortgage preapproval stage, so be sure to learn more about how preapproval affects your credit score.