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2016-02-09 18:01:02
What Credit Score Is Needed to Buy A House?

Credit scores are an important consideration in qualifying for a home loan. Down payment is the other vital component and can be more of a stumbling block than credit. The truth is that the higher your credit rating, the more choices you will have, but you aren't necessarily locked out of home ownership even if you have some credit problems.

FHA Financing

In general, if you're interested in FHA financing, the minimum required FICO score is 580 in order to qualify for a 3.5 percent down payment. The minimal down payment represents a huge advantage for first-time buyers or anyone with limited funds. FHA loans have additional benefits: lower fees and closing costs as well as less stringent underwriting requirements. Some credit problems, including a previous bankruptcy, may also be forgiven, as long as you are working to keep payments current and spend responsibly.

An optional path for those with lower scores is to put more money down, a minimum of 10 percent, in order to secure a loan. An informed financial adviser or real estate professional can offer you advice on the pros and cons of taking that route to home ownership. Your interest rate over the full term of the mortgage will be higher, and you will tie up substantially more cash. Even if you have the funds for the down payment, you must weigh the advantages in your own situation. You might conclude that trying to improve your score would be better, both in terms of money and timing.

With the right financial advice, and the ability to pay loan balances, clear existing debt, and tighten up your budget, you could, improve your credit rating substantially. The difference in interest payments alone over the life of the mortgage could be many thousands of dollars.

Other Loans

If you have a VA entitlement, you may have an easier path to ownership. Military service veterans who are eligible may qualify for zero down payment loans up to $417,000 in most areas. You must intend to occupy the property yourself, you must have a steady income and satisfactory credit, and your existing financial obligations and debt must fall within established guidelines. But VA-approved lenders have some flexibility regarding credit scores, so if you are a veteran with reasonable credit history and a steady job, you certainly should check into this unique benefit program.

Conventional loans generally require better credit scores and higher down payments. With both, you should have your choice of loan options. If you have a higher credit score but are short on savings, you might be able to take advantage of opportunities for first-time buyers, location-specific loans, builder incentives or seller financing. Rent-to-own options and other types of creative financing might also exist in your area.

If you are determined to buy, Cowdin Group is ready to assess your current credit situation and suggest potential loans so that you can find the right home at the right price.

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