What Credit Score is Needed to Buy a Home

The recent economic recession and sub-prime crisis that rocked the United States economy and also the world economy was largely contributed by the sub-prime lending of mortgage loans and home loans. In very basic facts, sub-prime crisis arose as a result of lending at lower and sub-prime credit scores. Post the recession, lenders have substantially changed their policies, and hence the query regarding the relevant credit score requirement. The credit score needed to buy a house is usually recommend by three prominent bodies, namely, the Federal Housing Administration (FHA), Freddi Mac and Fannie Mae. The lender however, follow some different underwriting procedures. The answer to the query what credit score is needed to buy a home, is 600 to 700. A more detailed description of credit score to buy a house, with the help of a mortgage loan or home loan, has been given in the following article. Let's have a look...

Credit Score Needed to Buy a Home

The standard credit score scale, which is used by FICO and almost all lenders, banks and lending institutions extends from 300 to 850. Ordinarily, the average credit score is about 600. Maximum American consumers who have credit reports, have a score of around 600. Now, the credit score needed to buy a house, differs from lender to lender. Scores above 620 are considered positively by almost all lenders. If you go to a standard bank, which is quite prominent, then the minimum credit score to buy a house would extend above 650. For a 650 score you will get approval plus a good interest rate of about 4% to 5%. In some cases, the lender may also demand a 760+ score but the interest would be about 4%, which is an excellent rate. The minimum credit score for home loan from prominent banks is 620, or 600 but less.

Private lenders and some lending institutions, on the other hand, also approve home loans for rates lesser than 620. The lowest credit score to buy a house, is about 500, but you will have to face a 10% interest rate, which is very expensive. There are some lenders who give home loans for bad credit scores. However, it is always recommended to avoid such loans as they have a really expensive interest rate. Thus, if you are planning to get a house, it is recommended that you get a really good credit score.

The Lender's View

Apart from a good credit score for mortgage, there are several other things that the lenders take into consideration while approving your loan. In order to buy a house, you also need to consider the following aspects other than the usual credit score rating scale:

• The equity projection of the property.
• Other debt that are owed by you, and a debt to equity ratio.
• Your monthly income, as an individual and as a household.
• Current assets held by you.

The credit score needed to buy a house, is quite low. However, if you wait for some time and get an excellent credit score, that ranges from 700 to 850, then you will get the best possible interest rate, which will save you a substantial sum of money. I hope that you have the answer to the query 'what credit score is needed to buy a home', and the elaboration on credit score to buy a house, is resourceful. Good luck.