First, what is considered “good” credit? Ideally to purchase a home you will want a credit score of 620 or higher. However, some lenders will make loans for credits scores of 580 and up.
If your credit score is 580 or higher that doesn’t necessarily mean you can qualify for a loan. Lenders take in consideration other factors as well including; down payment funds, other debts and job history. You can learn more about the other mortgage requirements here.
Borrowers with a lower credit scores are considered a riskier investment to lenders. So if you do qualify with a lower score, you can expect higher interest rates. How much can a better credit score save you?
Is your score below 580? If so you may have to wait and fix your credit. We know that is not the answer you want to hear but let us tell you why waiting may be the best option.
You have time to wait. Low prices and interest rates will remain low for a few more years. Maybe not as low as today but you do have some time. And in the long run, having a better score will save you tons of money as well as saving more for the down payment. You’ll avoid higher interest rates and mortgage insurance fees.
However, one way to get around the tougher lending standards is to get a co-signer with good credit. Co-signing on a house allows for you to improve your credit while making on time payments and alleviates the banks/ lenders risk by having a second party on the mortgage.
If you are uncertain about your capability to qualify for a mortgage you should speak to a lender, sooner rather than later. They can speak to your particular situation and it will save you time further down the road.
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