Are you thinking about buying a brand new home? Congratulations!
A new home is a fantastic way to create new memories or start a new chapter in your life. Whether you are looking at homes for sale in Philadelphia or the surrounding areas, the Joseph Bograd Realtor team is here to help you through every step of the way.
There are many different aspects that go into buying a home. One of the most important things to consider when buying the home of your dreams is the state of your credit score. With different loan types, amounts, and credit score ranges, there is a plan for everyone. Take a look below to see what type of loan works best for you!
How Your Credit Score Affects Your Mortgage Loan
When you apply for a mortgage, your credit score is reviewed by mortgage lenders to determine what kind of loan you qualify for. Lenders use your FICO score to calculate different interest rates depending on your score. As of 2020, the average credit score of Pennsylvania residents who had opened new mortgage loans was 715. Here are some examples of available home loans plans:
- Conventional Loan: A conventional loan plan is given out by private lenders and is not insured by the federal government. The ideal credit score to have to qualify for this loan is anywhere between 620 and 660 or higher. The higher the credit score, the lower your interest rate will be.
- FHA Loan: If you are looking to buy a home with a credit score between 500 — 580, this loan insured by the Federal Housing Administration may be the one for you. If you have a 500 credit score, be prepared to make at least a 10% down payment.
- VA Loan: For active US military members, veterans, or spouses of those who died in duty, the Department of Veterans Affairs has no minimum credit score to buy a home. However, most lenders like to see a credit score around 620.
- USDA Loan: If you are looking to buy a home in a rural area, the Department of Agriculture has options for low-moderate income individuals. While they are flexible on what credit scores they will give loans to, it is best to be around 580.
Help! My Credit Score Is Too Low
According to Quicken Loans, it is possible to apply for a loan with a lower credit score, but it automatically makes you a risky borrower. This may seem discouraging, but there are still ways to get the loan you need:
- Start by looking into an FHA loan if your score is around 500. You can still qualify for a loan, but more money down will be required.
- Check in with your credit reports and utilization score and see how you can increase your score every month.
- If you have enough cash to make a sizeable down payment, your credit score to buy a home may not be looked at too heavily.
There is no reason to wait any longer! Look into what loan options are good for you and get approved today. Contact us to take the next step into your future and view houses for sale in Bucks County!