Island Home Loans Blog

Mortgage Guide Credit Score Requirements

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!

  1. Return to Buying Your First Home
  2. Assets & Reserve Requirements
  3. Credit Score Requirements
  4. Debt Ratios
  5. Stable income & Employment
  6. Down Payment

 

Source: https://mortgage.info/general-mortgage-requirements-first-time-home-buyers/