When purchasing a house, one of the most important factors that lenders consider is your credit score.
Your credit score is a numerical representation of your creditworthiness based on your credit history.
This can include things like how much credit you have, how much debt you have, and your payment history
For example: do you pay your bills on time, have collections, or are your credit cards maxed out?
A high credit score can make qualifying for a home loan easier, while a low credit score can make it more difficult.
In this article, we will discuss what kind of credit score is needed to buy a house in Colorado and how you can improve your score to increase your chances of getting approved for a home loan.
What is the credit score needed to buy a house in Colorado?
The credit score required to buy a house in Colorado can vary depending on the lender and the type of loan you are applying for.
Generally speaking, a 620 credit score will get you approved for most government programs, and 640+ will help get you approved for conventional mortgage programs.
If your credit score is below 620, it will be more challenging to qualify for a loan, and you will have to pay a higher interest rate than someone with a higher credit score.
However, having a credit score above 620 doesn’t guarantee that you will be approved for a mortgage.
Lenders will consider other factors such as income, employment, and debt-to-income ratio.
The credit score is just one of the many factors lenders consider when determining whether you qualify for a home loan, and having a high credit score can help you be eligible for much better terms.
What are the Colorado credit score requirements for the different loan types?
FHA loans are known to be more flexible with credit score requirements compared to conventional loans.
Generally, the minimum credit score required to qualify for an FHA loan is 620; some lenders may have less strict requirements and can approve loans for borrowers with a credit score of 580.
Coole Home has a minimum credit score requirement of 620.
VA loans are also flexible with credit score requirements.
For example, most lenders will want a minimum credit score of 620, but some lenders will go down to 580.
Coole Home has a minimum credit score requirement of 620.
The minimum credit score required to qualify for a conventional loan in Colorado can vary from lender to lender, but most will require a minimum credit score of 620.
Again, our minimum credit score requirement is 620.
Even if your credit score is excellent, with a score of 680 or higher, lenders still want to ensure you’re financially stable by looking at other factors such as income, employment, and debt-to-income ratio.
So, before you start house hunting, remember to go through the pre-approval process.
You want to avoid making an offer on the house and then getting denied because you didn’t go through the pre-approval process first.
How do you increase a credit score?
There are several ways to improve your credit score; just like going to the gym, it takes effort, discipline, and consistency.
Here are a few ways to increase your credit score so you can buy a home in Colorado!
- Make sure to pay your bills on time; late payments hurt your credit score.
- Try to reduce your debt because high debt can also hurt your credit score, so try to pay off as much debt as possible.
- Keep your credit card balances low; otherwise, having maxed-out credit cards doesn’t look good.
- Avoid applying for new credit too often because applying for credit too frequently is a red flag to lenders.
- Dispute errors on your credit report because, let’s face it, mistakes happen, but they don’t have to stay on your report forever. Disputing and removing these errors could increase your credit score.
- Avoid closing old credit card accounts because the more senior the credit history, the better.
- And lastly, use a credit monitoring service because knowledge is power
Remember that building a good credit score takes time and consistent effort, so expect to see only tiny improvements month over month.
By consistently practicing good credit habits, you can improve your score over time and make it easier for you to qualify for a mortgage in Colorado.
Are you ready to apply? Start the process by completing the form below.