Submitted by: Camille Powell
Curious to know what credit score is required for a mortgage? We will break it down below; it may be easier to get qualified for a home loan than you think. What credit score is required for a mortgage, fico score, home loans, mortgage? What is a good credit score for a mortgage? According to data from the most recent Origination Insight Report by Ellie Mae, the average FICO score on closed loans reached 753 in February. As lending standards have tightened recently, many are concerned over whether their credit score is strong enough to qualify for a mortgage. While stricter lending standards could be a challenge for some, many buyers may be surprised by the options that are still available for borrowers with lower credit scores. Average Credit Score for Closed Home Loans…The fact that the average American has seen their credit score go up in recent years is a great sign of financial health. As someone’s score rises, they are building toward a stronger financial future. As more Americans with strong credit enter the housing market, we see a natural increase in the FICO score distribution of closed loans, as shown in the graph below: If your credit score is below 750, it is easy to see this data and fear that you may not be able to qualify for a mortgage. However, that is not always the case. While most borrowers right now do have a score above 750, there is more to qualifying for a mortgage than just the credit score, and there are still options that allow people with lower credit scores to buy their dream home. Conventional loans: “The most popular loan type typically comes with a 620 minimum credit score.” S. Department of Agriculture (USDA) loans: “In general, lenders require a minimum credit score of 640 for a USDA loan. S. Department of Veterans Affairs (VA) loans: “VA loans don’t technically have a minimum credit score, but lenders will typically require around 620.” There is no doubt a higher credit score will give you more options and better terms when applying for a mortgage, especially when lending is tight as it is currently. When planning to buy a home, speaking to an expert about steps you can take to improve your credit score is essential, so you are in the best position possible. However, do not rule yourself out if your score is less than perfect – today’s market is still full of opportunity.