Ideal Credit for Obtaining a Mortgage
A person’s credit score can determine whether or not they can obtain a loan or a mortgage on a home or a car. A low credit score can mean you’re a risky borrower, but a high score can increase your chances of landing a mortgage as well as could be offered better terms.
Minimum score for a mortgage?
The minimum credit score to receive a loan on a home depends on the type of loan you’re deciding to go for. FHA loans is probably the best option, especially for first time homebuyers, they have the lowest credit score requirements which is 580 with a 3.5% down payment. But, there are ways around this, FHA lenders allow scores lower than 580 but must make a down payment of 10% or more. Then there are other ones like the VA loans, they don’t have a minimum credit score requirement but the lenders do, and that can vary, it could range from 620-640.
What’s considered good credit?
Depending on your credit score it can change the interest rate given to you as well as how much you’ll pay in private mortgage insurance (PMI). Whats considered good credit would be around 740 or better, that’s considered perfect credit for mortgages. If you end up putting less than 20% down, you’ll need PMI. Anything below 700 would be considered “fair” credit as far as mortgages.
How can I improve my credit?
There are a lot of simple ways to improve your credit score. One of the number one problems would be high credit utilization ratio. It’s best to follow the 30% rule, charges to your credit card shouldn’t be over 30% of your available credit limit. If you can do less than that keeping it as low as 15%. The best way to reduce this is pay down your credit card debt as much as possible!
Another easy way is make your payments on time each month, simple as that. Also, make sure you don’t have anything in collections that were unpaid, if so, make sure that’s taken care of. Usually it takes a couple months for your credit score to be changed or increase.