Saturday, March 27, 2021 / by Breanna Thornton
What Credit Score Do I Need for a Loan?
Based on trends, it’s easy to notice that the average credit score for obtaining a mortgage is getting higher. This seems scary to some, but if your score is lower than the average there is no need to panic. The purpose of this blog post is to talk about the different credit scores and options associated with each one.
Image from NFCC.com
The average FICO credit score right now for people successfully getting mortgages is about a 750. In this range, you can qualify for some of the best plans during this competitive market. This looks like a high score, but trends across the country show that Americans are starting to increase their scores with better financial habits.
There are some conventional loans that require a minimum of a 620 credit score. This is basically a loan that is not backed by a government agency, and instead by private companies. These agencies will typically look at your credit history as well as your credit score.
USDA (S. Department of Agriculture) loans typically require a 640 credit score, although some lenders may require a minimum of 580.
(FSA) Federal Housing Administration offers loans on a 3.5% down payment with around a 580 credit score. If you can get your down payment up to 10%, a smaller credit score can be accepted as well.
Loans for veterans (VA) usually need about a 600 credit score. However, there is no technical requirement needed when applying for this type of loan. As always, the higher the score, the better off you are when applying.
For a simple breakdown of the FICO score distribution among closed loans, check out this graph! Even if you are in the bottom 46% range, there are options open to you if you do the right research and talk to lenders.
As always, talking with a lender will give you a better idea of what you qualify for at the end of the day. There are quite a few factors that determine whether you qualify for a loan. If you have any questions, feel free to ask! We would love to help you move forward with confidence in the home buying process. It is a very important one!
Header image from crosswalk.com