What Credit Score Do You Need To Get A Mortgage?

January 25, 2023

What Credit Score Do You Need To Get A Mortgage?

What credit score do I need to get a mortgage?

For first-time buyers, if you pay your bills on time (for the most part) and don’t have any bankruptcies or foreclosures, you most likely have a high enough score to get a mortgage.

The minimum credit score needed to get a mortgage can vary depending on the type of loan, property type, the lender and whether the property will be your primary residence, a second home, or an investment property. 

Since lenders often use your credit score as one of the primary factors in determining the interest rate they will offer on a mortgage, a higher credit score may result in a lower interest rate and lower monthly payments. Your credit score directly impacts your cost of credit, which is how much you’ll pay to finance the home. 

Keep in mind, some lenders apply "overlays" to credit score requirements. So, while one lender might require a 600, others might require a 620 or higher, regardless of the government agency’s minimum score requirements. Minimum credits scores can be as high as the lenders set them, so long as it’s higher than the agency’s requirement. 

“You typically need a minimum credit score of 620 or higher,” says Curtis Wood CEO of Bee Mortgage. “There are some lenders that allow you to go as low as 580 to 530 but they are far and few between. Most lenders, including Fannie Mae and government agencies, do require a minimum score of 620. So, your goal should be 620 or higher.”

If you're not sure what your credit score is, you can check your credit report for free once per year from each of the three major credit bureaus: Experian, TransUnion, and Equifax using AnnualCreditReport.com. You also can check your credit score for a fee from a credit reporting agency or through a credit card issuer that offers free credit scores to cardholders.

How to Improve Your Credit Score

It is possible to improve your credit score. Here are some steps you can take to start improving your numbers before applying for a mortgage:

Pay your bills on time – Your payment history is one of the most important factors in determining your credit score, so it is important to pay all bills on time. If you have a history of late payments, taking the time to establish a positive pattern of on-time payments can help to improve your number.

Reduce your credit card balances – When shopping for a home, it is important to keep balances as low as possible. Credit utilization, or the amount of credit you are currently using relative to your credit limits, is a key factor in your overall credit score. Ideally, try to keep balances below 30% of your credit limit.

Dispute any errors on your report - Errors can occur on your credit report. You can dispute these with the specific credit bureau. If you are successful in removing misinformation or out-of-date information, it can help to improve your credit score.

Do not close old credit accounts – Since it can reduce the total amount of credit available to you, it is important to avoid closing old credit accounts. To avoid any negative impact to your credit score, leave accounts that you no longer use open but use them very sparingly.

Avoid applying for new credit – If you are thinking about buying a home, try to avoid or limit the number of credit applications you make and only apply when you have a real need. Every time you apply, it can have a negative impact on your overall credit score.

It's worth noting that improving your credit score can take time, so it's important to be patient and consistent in your efforts. For someone with a low or borderline credit score, the good news is that each positive change you make can have a significant impact but it may take twelve to eighteen months of responsible use with timely repayment of charges.

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Bee is a leading Florida mortgage broker with over 10 Florida local offices that’s been featured heavily in the local and national news for its instant pre-approvals, low rates, fast closings, and new mobile technology. For more news and resources, click here.

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