Kamis, 24 Februari 2011


A credit score has become an integral part of all loan and credit card generation procedures. In the following article, an insight has been provided to all the credit score related aspects of the mortgage or home loan and other considerations when buying a house. A credit score is the most important aspect of underwriting process of the mortgage loan which would help you buy the real estate. Moving on to the answer to the query 'what is a good credit score to buy a house'...

Good Credit Score for Buying a House

The most common convention to buy a house is to get a mortgage loan, or a home loan or a real estate loan. As the economic recession is receding, subprime lending is being discouraged, and in some cases it is also being totally banned. Thus, it is best to have a good credit score, or at the most, an average one. The good credit score according to the FICO standards will be from 700 to 759 and an average score will be from 660 to 699. The best credit score that you can have is between 760 to 849. This credit score, will basically be of the best benefit for you. The advantage of having the best credit score is that you will get the best or lowest possible interest rate.

For an average credit score, you will have an APR (Annual Percentage Rate) of about 4.439%, for a good score, you will have 4.262% APR and for the best 4.040%. If you are even better than that, then you can have an APR as low as 3%. For a 30 year fixed APR mortgage of $100,000, you will have a monthly payment of about $500 for an average score, $490 for a good score and for the best or excellent credit score range you will have a monthly installment of $480. The conclusion thus, is that the better your credit score, the better or lower will be you installment and APR. It must be noted that the APR can differ from state to state.

Loan Underwriting Considerations

If you are considering all the credit report related requisites for home buying, then you should also be aware of the loan underwriting process. The loan underwriting is principally a method where the lender decides whether the loan would be a risky one or not. In this procedure the lender considers 3 principal factors, namely, the credit score, equity of the real estate and lastly, the cash flow or income. This approval is the most important aspect in the process of buying a house.

The credit score is used to determine the rate of interest, and the approval or sanction of the loan. Apart from that, the installments are also taken into consideration on the basis of the credit score. Along with the credit score, the credit report is also scrutinized, as defaults and prior foreclosures and bankruptcies often lead to the rejection of the loan. The second aspect is the consideration of the equity of the property. No mortgage or home loan is an unsecured loan, the property is always held as a collateral. Hence, the market projection of the property is also viewed. In such a situation if the projection is viewed to be drastically negative, then the loan might be declined. The last aspect is the income of the borrower or the cash flow, because the probability of late payments and defaults depends on the income of the borrower.

So, basically to get the best out of your loan, consider improving your credit score, which would reward you with a sufficiently lower rate of interest. I hope that the answer to the query, 'what is a good credit score to buy a house', was resourceful.

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