What Credit Score Is Needed To Buy A House?
There’s no one answer for this question. As a rule of thumb, the better your credit score, the better your interest rate. And the better your interest rate, the lower your monthly payment. Here’s what you need to know about what credit score is needed to buy a house.
For example, here’s a table from FICO about how your credit score translates to your monthly payment. Assume that you have a 216,000 30-year, fixed-rate mortgage:
|Your FICO Score||Interest Rate||Monthly Payment|
|760 – 850||3.97%||$1,028|
|700 – 759||4.19%||$1,055|
|680 – 699||4.37%||$1,078|
|660 – 679||4.58%||$1,105|
|640 – 659||5.01%||$1,161|
|620 – 639||5.56%||$1,235|
You can see that while it is still possible to get a mortgage on a home with a FICO score of 620, you will end up payment $207 more a month. This is $2,484 more a year and $74,520 more interest over 30 years. That’s a lot more interest!
To avoid this, it’s best to get your credit score as high as possible to ensure the best mortgage rates for your home purchase. Even if you think that your FICO score is fine, there may be errors that you should clear up before applying for a home loan. While addressing the errors may be annoying, it’s much better than dealing with them before applying for a loan than in the middle of buying a home.
If you want real numbers to strive for, you should aim to have a credit score of 740 or higher. This will allow you to get the best loans and interest rates. On the other end of the spectrum, it’s very difficult to get a mortgage with a credit score under 620. If that is your situation, it’s best to wait and increase your credit score before trying to secure a mortgage.
If you’d like to learn more about how to repair your credit, view your Credit Repair Guide.