![]() How can credit scores affect mortgage interest rates? So you might see slight differences in your scores depending on what model was used. And scoring companies like FICO and VantageScore® have different versions of their own scores. Keep in mind that there are multiple credit scores and scoring models. Those who are eligible will likely pay higher interest rates. Poor (350–579): A poor credit score shows you’re a risky borrower, which may make it harder to qualify for a mortgage. ![]() Fair (580–669): Although these borrowers have a below-average credit score, lenders typically still approve them for mortgage loans.Good (670–739): A credit score within this range can help you qualify for a loan, though interest rates may start climbing compared with someone with a higher credit score.As a very dependable borrower, you’re likely to qualify for attractive loan terms. Very good (740–799): This credit score range is considered above average.Exceptional (800–850): People with exceptional credit scores have generally shown they pay back money as agreed and may qualify for the best interest rates.What is a good credit score for buying a house? According to the USDA, borrowers typically need a credit score of at least 640 for the direct loan and at least 680 to qualify for the guaranteed loan. The USDA has flexible eligibility requirements for these loans. Direct loans are funded by the USDA, while guaranteed loans are funded by private banks and insured by the USDA. There are two main types of USDA mortgages. Department of Agriculture and are for homes in eligible rural areas. The VA doesn’t set a minimum credit score for these home loans, and lenders can develop their own requirements. They’re meant for veterans, active-duty military members and eligible surviving spouses. VA loans are loans that are guaranteed by the U.S. With a higher credit score-one that’s at least 580-you may qualify with a down payment as low as 3.5%. Department of Housing and Urban Development (HUD) says you may qualify for an FHA loan with a credit score of 500 as long as you put down at least 10%. ![]() ![]() These loans require smaller down payments than other types of mortgages. Mortgages insured by the Federal Housing Administration (FHA) are designed for people with less-than-perfect credit. Lenders usually look for a debt-to-income ratio of 43% or less, according to the Consumer Financial Protection Bureau (CFPB). Keep in mind: For a conventional mortgage, you’ll also typically need a low debt-to-income ratio, which measures how much of your monthly income goes toward debt expenses. But lenders can raise their own requirements. Most conventional loans are backed by mortgage companies Fannie Mae and Freddie Mac.įannie Mae says that conventional loans typically require a minimum credit score of 620.
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