Thinking about applying for a mortgage loan to buy a house with good credit? First, it’s a good idea to check your credit reports and know your credit score to determine if a lender will consider your credit good enough for a loan.
🤔 Why do I need to know my credit score?
Your ability to obtain a mortgage and a good interest rate is determined by your credit score. Although one may get a mortgage with a bad credit score, lenders often consider a good score of 670 or higher. The most attractive scores to lenders are the exceptional credit scores above 800.
️📄 Why do mortgage lenders consider credit scores?
A lender’s ability to pay off their debt is determined by credit scores. A high credit score is an indication that the prospective buyer is financially disciplined and reliable. It also indicates that such a person is capable of paying back the loan.
🌟 Can you buy a house with good credit?
You need to review the FICO credit score scale and gauge where you stand. This credit score scale ranges from exceptional to poor. If you see that your score isn’t as good as you thought it was, endeavor to improve your credit before starting the home buying process.
- Exceptional: 800 and above
- Very Good: 740 – 749
- Good: 670 – 739
- Fair: 580 – 669
- Poor: 579 and below
Besides credit score, other factors being considered by lenders prior to mortgage loan approval are your current income, your debt-to-loan ratio, and your debt-to-income ratio. Your credit may be great, but if you don’t meet the other requirements, you risk being denied.
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🕵️ Credit Score Break Down
Exceptional credit is a score of 800 or above. If this is you, the chance of getting a mortgage loan with a decent interest rate is almost guaranteed. Watch that debt-to-income ratio, however, because that could halt the entire process.
A good credit score is between 670 and 739. You’re still within the acceptable range to secure a mortgage loan. If your debt-to-income ratio is low, your chance of getting a lower interest rate improves.
A poor credit score is 579 and below. You may still qualify for a loan from a subprime lender, but you can expect to pay extraordinary interest rates and have a large down payment. In most cases, getting a loan is difficult with this score.
💵 How to Buy a House with Good Credit
A good credit score will have a long term positive impact on your finances and ensure that you enjoy the benefits associated with homeownership in years to come.