- August 29, 2019
- By Heather Gapol
- Island Home Loans News
Credit Score Requirements
One of the first things lenders look at when determining your eligibility for a home loan is your credit score.
You don’t need perfect credit to qualify. When a lender is considering you for a home loan, they are simply looking for your ability to repay your mortgage, without the risk of you defaulting on the loan.
With a higher credit score, interest rates will likely be lower. A lower credit score may mean higher interest rates, but that doesn’t disqualify you. A less than perfect credit score may come at different terms, but with steady employment or other sources of verifiable income, along with other adequate assets, you can still qualify for a loan with less than perfect credit.
What scores do loan programs require for First-Time Homebuyers?
- Conventional Loan – These loans have the toughest requirements. You’ll need around a 680 credit score to qualify for a conventional loan. In some cases, borrowers squeeze through with a lower credit score, but only because their other qualifying factors are well above the minimum requirements.
- USDA Loan – If you plan to live in a rural area and don’t make more than 115% of your area’s average median income, you may qualify for a USDA loan if you have a 640 credit score or higher. USDA loans provide 100% financing, which can be a great option for First-time Homebuyers.
- FHA Loan – FHA loans have more relaxed guidelines. In fact, they have one of the lowest credit score requirements today. You only need a 580 credit score to secure an FHA loan. In fact, the FHA even allows credit scores as low as 500, but you’ll need a higher down payment of at least 10% in order to do so.
- VA Loan – Veterans have the benefit of the flexible VA loan guidelines. The VA itself doesn’t have a minimum credit score requirement, but most VA lenders require a 620 credit score to qualify.
What are the General Mortgage Requirements for First-time Homebuyers?
Below we help you understand the basic guidelines so you can prepare yourself financially to help lead you down the right path to Homeownership!
- Return to Buying Your First Home
- Assets & Reserve Requirements
- Credit Score Requirements
- Debt Ratios
- Stable income & Employment
- Down Payment