The Credit Score You Need for a Home Loan

By Jennifer Quilter

Every lender makes their own decisions and has their own criteria, and they even change so that if you applied at a lender this year and they turned you down, that doesn´t mean they would a year from now even if your circtumstances were the same. With this variance in mind, we can still look at what you generally want to have for a credit rating when you go to apply for a mortgage—which, for the most part, is the best you can manage.

The scale ranges from 300 to 900, but most customers fall somewhere between 500 and 750, numbers on either end are very rare. If you have a rating below 500 you really shouldn´t even be looking at trying to get a mortgage right now, you need to spend probably two years really working on improving your finances before lenders will work with you with for much of anything, let alone a mortgage.

Where you ideally want to be is at 720 or above, which is as close to perfect as you´re likely to get. In this situation any lender will want to work with you and offer you the best possible interest rates on a loan, even one for a home. Of course, another big factor in what sort of deals you´ll be offered is what you have for a down payment, and your income, but in terms of your credit you are good to go.

Ratings between 680 and 720 will still be offered great deals, not the absolute best interest rate in most cases, but still something very good. If you have a good sized down payment your mortgage should be very manageable.

If you fall between 600 and 680 you´ll still most likely find a decent mortgage, although if you fall on the lower side of this range having a good down payment, of around twenty percent, will greatly help your application. Make sure to shop around to find your best offer, never take the first deal you see, there are still a lot of options available to you.

With a rating between 500 and 600 you probably still will be able to find a lender, even though they will be difficult to find, but I really recommend waiting awhile to improve your rating because your interest rate will raise your interest rate a great deal, which will affect the amount you have to pay for your home in total, and raise your monthly payments. If you have a down payment are still seriously considering trying to find a mortgage, I recommend still trying to go with a traditional lender first instead of finding a subprime (or bad credit) mortgage. A subprime lender will most likely offer you a higher interest rate than a traditional one. They will be more likely to work with you, yes, but you pay a price for that.

Your credit score plays a big part in whether or not a lender will decide to work with you, but so does your down payment, your employment history, and a large number of other factors from your history. When you go to apply talk to your potential lenders, shop around, and make sure to thoroughly read terms and conditions before signing anything.

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For more information on what affects your score check out the credit score range and for more on what all those numbers mean and acceptable scores for mortgages check out the Credit Rating Scale.