What Credit Score is Needed for a Mortgage Loan?
© 2009, Brandon Cornett. All rights reserved.
Reader Question: What does it take to get a mortgage loan in the current economy? What credit score is needed for to qualify for a mortgage and buy a house?
These are such common questions from first-time home buyers, I thought it was time to address them again with this updated article. So in this blog entry, I’ll tell you everything you need to know about credit scores, mortgage loans, and how to put them together so you can buy a home.
 |
Check Your Score First |
What score is needed to for a mortgage loan in the current economy? Here are some of the key points a first-time home buyer should know when entering the real estate market in 2010:
Credit Scores and Mortgage Loans
- When you apply for a loan, you will have to submit a variety of financial documents relating to your income, debt, etc. The lender will also check your credit score. So while it’s certainly important, your score is only one part of the approval process.
- The score needed to get a mortgage loan will vary from one lender to another. In the current economy (2009), you’ll probably need at least a 650 to get a loan. If you want to qualify for the best interest rates the lender has to offer, you’ll need a score in the mid to upper 700s.
- By current standards, a credit score of 760 or above will usually get you the best rates — so long as you meet all of the lender’s other requirements.
- Your debt-to-income (DTI) ratio is another key factor in the qualification / approval process. If your debt is too high relative to your monthly income, you’ll have trouble getting a loan. Most lenders want to see a DTI ratio of 35% or lower. Tip: Do a Google search for “DTI calculator” to calculate your own ratio.
- The credit score needed to get a home mortgage loan changes over time. Right now, in the wake of our housing crisis, the standards are at their highest point in more than a decade.
- Before you start applying for mortgage quotes, you should get your credit scores from all three reporting bureaus — Experian, TransUnion and Equifax. That way, you’ll know if you need to improve your credit before talking to lenders.
- It takes time to improve a score, so you should find out where you stand sooner rather than later. To get started, you can use the link beside the orange arrow at the top of this page.
The credit score needed for a mortgage loan will vary from one lender to another. But they all have similar standards these days. You’ll probably need at least a 650 FICO score just to get a loan, and you’ll need something north of 750 if you want to qualify for the lender’s best rates.
Buying your first home can be a lot of work. There are many steps along the way, and you could face a variety of obstacles as well. The last thing you want to do is add another hurdle to your path — and that’s exactly what happens when you have bad credit. So find out what your score is today. And if you find that it’s low, do what’s necessary to improve it before applying for a loan.
Related article: What Score Do I Need to Buy a House?