Fridays with the Fiddle Fig: Credit Scores
This week's topic: Credit scores when buying a home
Many people believe that if they do not have a great credit score then they won't be able to buy a home.
Credit can be a big concern for clients of ours and people I talk to about buying a home. In reality, a bad credit score does not necessarily mean that you won't qualify for a loan.
Let me break down two types of loan products and their credit score thresholds:
FHA has no actual credit requirement. An FHA Credit Score of 580 can get you a reasonable loan. You can even have a charge off or a collection on your credit and it does not have to be paid off before you get the loan. FHA 620 and above will get you your best loan terms. So it really comes down to the quality of terms you will receive based on where you're at with your credit.
Now a conventional loan tends to be a little more cut and dry. Here is broken down for you:
- 640 Minimum score
- 680 gets you good lending terms
- 720 gets the best lending terms
If you're at 740 and above it really has no effect on your loan options. What does it get you? Great bragging rights! But that's about it.
If you would like to buy a home but feel like your credit is not good enough, lets talk. We can put you in touch with a great lender who will go over options with you. You may be surprised at what you can afford.