Credit scores play a critical role in the home-buying process. The stronger your score, the better the chance that you'll be able to get a mortgage with great interest rate.
Buyers with scores in the 700s save thousands in interest payments over the life of the loan.
You don't need a perfect credit score to buy a house, but having a higher credit score makes a big difference in the amount of money you pay over the course of a loan.
Minimum credit score requirements are different for every lender, and also for each loan program, and property type.
Government loan programs have a lower score requirement than a conventional loan.
Below is the list of the minimum credit score requirements.
|LOAN TYPE||MINIMUM CREDIT SCORE||DESIGNED FOR|
|FHA home loan (government loan)||580 with a 3.5% down payment; 500 with 10% down
||Buyers who are interested in a low down payment|
|VA home loan (government loan)||580 credit score, though some lenders will allow a score as low as 500
|Veterans buying a home|
|USDA home loan (government loan)||580 credit score; but some lenders will allow a score as low as 500.
||Qualified buyers purchasing a home in a designated rural area|
|Conventional home loan||620 is the minimum.
0 credit score is also acceptable
|Buyers seeking a traditional mortgage|
Yes, it is possible, your options will be limited and you may be required to provide proof that you've been paying your bills on time, including rent.
It may be a frustrating process for you because the lender will require lots of documentation to show that you are capable of handling a new mortgage payment.
Your interest rate will also be in the higher range, but at least you'll be able to become a new homeowner.
Read more: How to improve your credit score >>
Credit scores are an indication of how risky you are as a borrower. The lower the score the higher the risk.
This is why interest rates are higher for lower credit scores.
Read on: Why your credit score matters <<