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The Ideal Credit Score to Buy a House

Credit score for home buyers

The credit score is a fundamental component for buying a house.  A high score will give you access to better mortgage terms and interest rates, while a low one may not qualify you for a mortgage at all.

Naturally, you’ll want to have the ideal credit score that’s needed to buy a house. While you don’t need to register a perfect record, like 850, it’s typically more than enough to have a score ranging from 620 to 740 — depending on the lender and type of loan. Let’s take a closer look at the benefits and options of this ideal range.

Credit score of 740+

With a score of 740 or above, you’re more than likely to qualify for the best rates. For example, if you got a $200,000 mortgage with a 30-year fixed rate in February earlier this year, you’d have a monthly cost of around $874 to $898.

Additionally, if you have a credit score of 750+, you’ll get considerably low interest rates for a conventional loan. The higher you go, the better discounts you get on private mortgage insurance — 760 will allow you to just pay 0.30% for a down payment of 10%.

Credit score of 700-739

In this better-than-average range, you can benefit from fairly good rates from a number of lenders. You’ll likely find lenders who will look favorably on a jumbo loan. 

A jumbo loan or non-conforming conventional mortgage is usually for properties that go over the $500,000 purchase price. The criteria to underwrite such a loan is stringent, so make sure you’re prepared to hurdle through all the steps. Lenders will check for low debt-to-income ratio, plentiful cash reserves, and extensive documentation (e.g. tax returns, 1099 IRS forms).  

Credit score of 620-699

We consider this as the middle ground in the credit scoring range. While it won’t get you the lowest interest rates, a score of 620 or more will give you a decent amount of loan options. 

You can get loans offered by the Federal Housing Administration (FHA), the United States Department of Agriculture (USDA), or the Department of Veterans Affairs (VA). You can also get decent rates on conventional loans. 

Go any lower than this range and it’ll be more difficult to get loan terms that will work in your favor.

Best practices to maintain and further boost credit score

There are several best practices that can keep your credit score trending on the upside. Aside from paying your bills on time, it’s important to: 

Have a low overall credit balance. Using about 30% or less of your credit card limit will reflect well on you. That’s what financial health experts generally recommend. 

Review credit reports. Little errors and mistakes in your credit report may come to bite you back later on, essentially bumping down your score. Don’t hesitate to flag an error to the credit bureau and have it rectified. 

Get a good credit mix going. If the opportunity presents itself, show a stable track record of payment across different credit lines. Consider going beyond just credit cards and installment loans. 

With a good credit score under your belt, the next step is to hire the services of seasoned agents from The Peninsula Group Real Estate — one of the best Realtors you’ll find in Carmel, CA. We’ll help you secure your dream home. Just call us at 831.595.5045 or send us an email at info(at)ThePeninsulaGroup(dotted)com.