Home Buying Preparations – Credit

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blog-author-clayjeffreys3

Last time we looked at income when qualifying to buy a home. This time, let’s talk about credit.

I know what most of us hear on the news… need “perfect” credit to buy a home. Well, that just isn’t true. Not only can a buyer qualify to purchase a home with an average credit score (around 660-680), what if I told you someone with a below average credit score could buy a home.

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Yes, it is true.

That brings us to a great question. What is the minimum credit score when buying a home? That depends on the loan program.

  • Conventional Loan – minimum credit score is 620
  • FHA Loan – minimum credit score is 640
  • VA Loan – minimum credit score is 620

Now the next question would shift to the interest rate. The common assumption is that a low credit score will really impact the interest rate. Well, again, that depends on the loan program. Would you believe it if I told you:

  • a buyer with a 640 credit score with only a 3.5% down payment could qualify for an FHA loan with a rate under 4%
  • a buyer with a 620 credit score with no down payment could qualify for a VA loan with a rate under 4%
  • a buyer with a 620 credit score with a 5% down payment could qualify for a conventional loan with a rate in the mid 3’s

Last year I qualified a buyer with a 624 credit score for a 15 year fixed conventional loan at a rate of 3.375%. Why? While a 30 year fixed rate loan has a dramatically higher interest rate with a low credit score, the same interest rate increase does not apply to FHA loans, VA loans or 15 and 10 year conventional loans.

Don’t let anyone make you think a bad credit score means a high interest rate. There are ways around a lower credit score so long as the middle credit score is over 620.

Looking to buy a home, but afraid you will get hosed on the interest rate due to a lower credit score? That may not be the case. Contact me today to get started on your new home loan for properties in the state of Georgia.

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