Myth: Home buyers in Washington State need perfect credit to qualify for a mortgage loan and buy a house.
Fact: While having excellent credit could help you land a lower interest rate, you don’t necessarily need a “perfect” credit score to qualify for a mortgage loan in Washington. Today’s lending industry is more flexible than most people realize.
Perfect Credit Not Needed to Buy a Home in Washington
It’s a common misconception that home buyers need excellent or perfect credit to qualify for a mortgage loan. The truth is that some mortgage programs offer quite a bit of flexibility, when it comes to borrower credit scores. The government-backed programs in particular (FHA and VA) can be fairly “forgiving” in this area.
So you don’t necessarily need perfect credit to buy a home in Washington.
Generally speaking, a credit score of 600 or higher will put a home buyer in a pretty good position to qualify for a mortgage loan. Just keep in mind there are other qualifying factors as well. These include having sufficient income to repay the loan, a manageable level of debt, and (in some cases) a down payment.
To be clear, there are benefits to having a higher score. Having excellent credit will not only make it easier to qualify for a mortgage loan in Washington, but could also help you secure a lower interest rate. And this could save you money over the long term.
Average FICO Scores Among Home Buyers
Each month, the mortgage software company Ellie Mae puts out an “Origination Insight Report” that offers an in-depth look at mortgage lending trends in Washington State and nationwide.
One of the things they report is the average FICO credit score among closed loans. (These are successful home loans that actually reach the finish line.) By looking at the parameters associated with such loans, borrowers can get a better understanding of what it takes to qualify for a mortgage loan in Washington or elsewhere in the country.
Here are some credit score trends revealed in their latest report, from December 2017:
- For FHA loans, slightly more than 7% of closed loans went to borrowers with FICO scores between 500 and 600. The rest (and the majority) went to borrowers with scores of 600 or higher. This shows that it’s possible to qualify for an FHA-insured mortgage loan with a score slightly below 600.
- With conventional loans, on the other hand, less than 1% of closed loans fell into the 500-to-600 FICO range. The vast majority of borrowers in this category had credit scores of 600 or higher. So clearly the standards are a bit higher for conventional mortgages, compared to FHA.
This report reveals a couple of interesting points regarding the credit score needed to buy a house in Washington state. First, it shows us that most of the home loans that successfully closed went to borrowers with credit scores of 600 or higher on the FICO scoring range. We can also see that the FHA mortgage program is a bit more forgiving, when it comes to credit-score requirements for borrowers.
Another important point: Mortgage lenders tend to look at the “big picture” when qualifying home loan applicants. So don’t be discouraged by anything covered in this article. The best way to find out if you’re a good candidate for a mortgage loan (and how much you might be able to borrow) is by speaking to a knowledgeable loan officer. And that’s where we come in!