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Summary: You may have heard that you need a good credit score to get approved for a mortgage. The question is, how high does your score have to be? This article will answer that question.
Over the course of a lifetime, financial development can lead to some wonderful opportunities. A person’s financial development and state of affairs is something that is particularly important when it comes to taking out a bank loan to further progress in life, and the largest loan most people will require is a mortgage for a home purchase.
Since the process of getting approved for a mortgage is heavily dependent on credit history and that three-digit credit score that reflects reliability as a borrower, you should always put forth practices to keep that number healthy and growing.
However, how much importance does a credit score hold? Does that magic, three-digit number need to be above 800 in order to get approved for a mortgage?
When you apply for a mortgage, you will have to provide certain information to your financial institution or mortgage broker. The mortgage specialist at your bank or mortgage broker will then pull your credit score and your credit report.
Fair, Isaac and Company is the scorekeeper of your FICO score, which ranges from 300 to 850, 850 being the highest of all scores, and 300 being the lowest.
Every person in the United States has three FICO scores from the three different credit-reporting bureaus. Up to 80 percent of financial lenders will use a borrower’s FICO score in order to approve a mortgage application and determine a suitable interest rate on the loan.
If your credit score isn’t perfect (ie. above the 800 mark), you need not worry too much. There are many options available for those with credit scores around 620, and, with many different financial lenders to consider, having a mortgage approved sometimes means persisting with an application to several different lenders before receiving a “yes.”
With a “fair” and “good” credit rating falling between 620 and 719, there are options available to get approved for a mortgage well under the perfect 800 mark. An FHA loan is a type of mortgage loan that is insured by the US Federal Housing Administration, offering an option with more flexible qualification measures. For homebuyers with a credit score above 620, this is a viable and common option.
The median credit score in the United States is 723, and anything above 740 is placed with the marker of “excellent credit.” Therefore, just because you may range just slightly above 720, which may feel miles away from a perfect 800, you’re likely in just as good of shape when it comes to getting approved for a mortgage. You can expect a mortgage approval with good interest rates if you have a credit score higher than 720.
Keeping an eye on your credit rating and understanding the measures that are used in determining your credit score will certainly help you maintain a good score. Of course, speaking with a professional and receiving expert advice is always recommended. For specified information on your particular situation, contact your mortgage professional to discuss your options for receiving a mortgage loan.
Do you have questions about mortgages? Are you ready to apply for one? Sammamish Mortgage is here to help. We are a local, family-owned company and have been providing several different mortgage programs to borrowers in Washington, Oregon, Idaho, and Colorado since 1992. Please contact us if you have mortgage-related questions.
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It’s difficult to begin shopping around for a new mortgage without the facts on how this can affect your FICO score. Thankfully, not all credit checks are created equal and they do not affect FICO scores in the same way.