What Is A Good Credit Score For A Mortgage In 2020

So you might be in the process of buying a new house and your thinking to yourself “what is a good credit score for a mortgage?”. Credit scores are a huge part of being a consumer in America, especially when dealing with financing. Whether you’re buying a new car or a house everyone is asking about your credit score. So why is it so important to have a good credit score and what is the minimum you need for a mortgage?

what is a good credit score for a mortgage

Having a good credit score shows banks and other institutions you are responsible for your money and you pay off debts when inquired. Debts can be revolving or installment meaning you pay as it comes with no clear end like a credit card. That would be revolving debt. An installment debt is working towards paying off a larger debt like a car payment or a mortgage.

What Is A Good Credit Score For A Mortgage?

Credit scores are reported by the three agencies TransUnion, Equifax, and Experian. They are judged by certain criteria being payment history (35%) amount owed (30%) Length of credit history (15%) types of credit (10%) new credit (10%). The Fair Credit Reporting Act (FCRA) requires the three credit agencies to give you one free credit report upon request every 12 months. You can visit annualcreditreport.com to request it but use it wisely. This was all a brief overview of credit reports and credit scores.

For an FHA loan which is a government-backed loan you can have at the lowest a 500 to 579 but you will need to put 10% of the home value as a down payment. To only put 3.5% down you need a credit score of 580. These are the minimum requirements for an FHA loan and not a “good credit score”

For conventional loans to get a fair rate without subprime terms you will need at least a 620 to 680. Note this is around the lowest lenders will accept so higher interest rates usually accompany these loans. For an interest rate at or below the market rate, you will need at least a 730. This puts you in a good position to ask for lower rates and gives you more power on what terms you want.

So what is a good credit score for a mortgage? While the minimum credit score might be at 500 or 620 we would recommend trying to raise your credit score to the 700s before getting a mortgage. This might take some time but will save you thousands of dollars when you get and start paying off your mortgage since you will have a lower interest rate than going in with a lower credit score interest.

While it is hard keeping up with your credit score since you can not always monitor it, being up to date on credit card bills and car leases puts you on a good track. Reports show that the average FICO score has raised 9 points in America since March.

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