In February 2021, the average credit score of an American adult was 698.
Do you know your credit score? If you want to purchase a home, you might want to find out what your score is before applying for a home loan.
Most lenders have credit score requirements that borrowers must meet, and you might wonder what lenders look for in a credit score for buying a house.
Here is a guide to help you know the minimum credit score you need to get a loan to buy a home.
Why Credit Scores Matter
Before you learn the recommended credit score for buying a house, you might want to know why your credit score matters so much.
Lenders base loan approvals on risk levels, and a person’s credit helps the lender determine the risk level. They will run a credit report to see where the person’s credit is at before responding to the loan application.
If the person has an acceptable credit score for buying a house, the lender might examine other financial details before approving the loan request.
Lenders view multiple things in addition to credit scores before approving mortgage loans, including a person’s down payment and debt-to-income ratio.
The Average Credit Score for Buying a House
Most lenders require a minimum credit score to buy a house at 620, but it depends on the loan program you use.
For example, if you want to get a conventional loan, the credit score requirements for buying a house are stricter. You might need a score of 680.
Other loan programs might have lower score requirements. For example, you might find a lender willing to give you an FHA loan if you have a score of 580 or higher.
You can compare minimum score requirements by loan programs to find the right program for your situation.
How to Buy a House With a Lower Score
If you have a score of at least 580, you might be able to increase your odds of getting approved for a loan if you offer a larger down payment. When you offer more money down, it decreases the lender’s risk with the loan.
Additionally, you can look into other options for buying a house with no credit score if your score is too low. For example, have you considered a rent to own home?
When you rent to own a house, you will not need a mortgage loan right now. Instead, the homeowner acts like a mortgage lender by holding the loan on the house. You pay the homeowner payments on the home purchase.
Work on Your Credit Before Buying a House
If you don’t meet the minimum credit score for buying a house right now, you might want to consider all your options. One option is to look for an alternative way to buy a home, while another option is to work on your credit.
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