617 Credit Score – The minimum credit score you need to buy a home in 2019 + FHA requirements
617 Credit Score – How to Choose
So, you’re thinking about buying a house and you just pulled your credit. Congrats! That’s a great first step. However, if your score is below 600, it may be time to make some adjustments.
But first, let’s talk loans. Specifically, let’s talk Federal Housing Administration, or FHA loans. These loans work well for many first-time homebuyers because they are backed by the Federal Government. This opens the door for the traditional lender (like a bank) to take more risk than they may normally, knowing that the federal government is offering a certain level of insurance. Great news if you’re not prepared to put 20% down on your first home!
The Federal Housing Administration has the ability to adjust qualifications such as FHA minimum credit score requirements, lending limits and more. At this time, there are no updates published for 2019 but it’s always wise to work with an FHA lender who can keep you up to speed on the latest policies. Right now, the minimum credit score to qualify for an FHA loan is 500. A 580 will qualify you for the minimum FHA down payment of 3.5%. And although 500 may be the FHA financing credit score requirement, always be working to increase your score because the average credit score DENIED by FHA lenders was actually in the low 600’s. In other words, the higher your credit score, the better chance you have of getting approved for a mortgage – so the lowest possible qualifying credit score should not be your goal.
Here’s what you might expect lenders to look for:
Again, a higher credit score than published minimums.
Expect to have your employment and income verified, even though it’s not technically required. The length of time you’ve been at your job can also be a factor – the longer the better!
The ability to make a larger down payment than the minimum and/or having a savings account or other assets is a positive when it comes to your overall risk factor.
Rent payments – believe it or not, what you’re currently paying in rent may help lenders decide if you can afford your new mortgage payment. If you’re renting in your grandmother’s basement for $150 a month, for example, adjusting to a $1,500 a month mortgage could be difficult.
If your credit is poor (between 500 and 600), you should work to improve it before applying for a mortgage. Focus on paying down debts, increasing your income and keeping up with loan or credit card payments and you’ll be well on your way!
Read our full post on credit scores and homeownership here: https://digs.co/minimum-credit-score-to-buy-a-house/