Buying or purchasing a home is quite a costly affair. Therefore, it is imperative that one has a reasonable grasp of all aspects of the purchase. However, one question that commonly comes to mind is, do you need credit to buy a house? Well, the answer is yes!
I, Amish Munshi, with over 20 years of experience, will assist you in understanding what is considered a good credit score for purchasing a house in San Ramon. Moreover, I will also answer your questions like, “What credit score do I need to buy a home?”
How Do Credit Scores Work?
The requirements for purchasing a house keep on evolving, and as such, updating yourself is essential to know what one has to go through. The typical home value in San Roman, as of 2024, is $16,87,247, which is a 10.8% value change in a year. Thus, you may never know how much of a value change will be there in a year. So, it’s essential that you keep your credit scores in check. Loans are approved based on credit scores. These credit scores depict whether the borrower is a responsible person or not with respect to the agreed loan terms. So confused about what credit score to buy a house? I have got you! Mentioned below is a general overview of how credit scores work:
1. 850 – 800: It means that the level is excellent. It is the highest range. Therefore, the borrower is classified as low-risk.
2. 799-740: This is considered a very good range. It shows that the borrower is a low-risk taker when it comes to borrowing. When in this range, it is rather easy to get credit.
3. 739 – 670: This is a good credit score range. These borrowers have strong negotiating positions since they are viewed as less credit-risky.
4. 669 – 580: This is the fair level. If you are in this range, lenders consider you at high risk, and hence, you should avoid falling into this category. This is a poor credit status since it hampers one’s ability to borrow credit.
5. 579 – 300: This is a poor credit score range. Here, you will be seen as considerably risky compared to those people who have a score above this mark.
What Do Mortgage Lenders Seek For In Credit Score?
Well, it won’t be wrong if I say mortgage lenders are quite choosy. They only choose the borrowers who have certain features in their credit scores. It is not only necessary to know “what credit score do I need to buy a home,” however, it’s also crucial to take into account the following elements while examining a mortgage application:
Payment History:
Banks and other credit companies are interested in the amount of credit you have previously taken and whether or not you paid back the money on time. They are very eager to know if there were any instances when you made a payment after the due date. They are also eager to know if you are a holder of bankruptcy or judgment records. Payment history serves for 35% of the credit score.
Employment History:
Employment history is also considered because it is an important factor that speaks about the borrower’s readiness to repay the loan. Here, if the borrower was employed in several companies within the last few years, this is likely to be viewed as an inability to regularly repay the loan. This implies that they could have a poor credit score, particularly if they have records of frequent employers.
Credit Utilization:
Credit utilization is a measure of credit used by a consumer within the card’s credit limit. It is a figure that rating agencies decide to arrive at through a calculation involving the total debt and total credit limit. The use of credit limits affects credit scores, and high utilization is likely to cause a drop in credit scores.
Credit Length History:
It is also important to be able to sustain a long credit history, which plays a good role in confirming the credibility of the borrower. There are several parameters, like the age of the oldest and the most recent credits, that are considered while looking at credit length history.
What Credit Scores Are Required To Get Loans?
As a borrower, knowing what credit score is necessary to buy a house. The credit types and the scores are outlined below:
1. Conventional Loans:
This type of loan requires a credit score of not less than 620. However, it has been discovered that depending on the organization or the country, the requirement can be 660 or more. Conventional loans are the most used form of mortgage funding. Conventional loans meet certain conditions imposed by the organizations sponsored by the government.
2. Jumbo Loans:
The credit score rating of jumbo loans ranges from 700 to 750. The minimum credit score to buy a house under this plan is 740. It is what is known as non-conforming credit. With my help, you can get yourself a hold of Jumbo loans up to $3M loan amount. However, keep in mind that higher amounts have higher interest rates.
These kinds of loans can be applied with a credit score as low as 500. This is given under the assumption of a 10% down payment of the total amount of the business deal. The down payment should be at least 3.5%, which needs at least 580. It is a type of mortgage that people get from a private lending entity, with the Federal Housing Administration insuring the loan.
4. VA Loans:
A VA loan relies on a particular lender to have faith in the borrower’s credit history. However, the minimum credit score to buy a house under this loan is 620. Such a loan was launched by the U.S. Department of Veterans Affairs for military employees, servicemen, and their relatives. Many countries have similar programs for their servicemen under different names and requirements.
5. USDA Loans:
Similar to VA Loans, these also do not require any minimum credit score. The best news is that a credit score as low as 580 can be sufficient to obtain a USDA loan. They are focused on middle to lower income earners in search of property in rural regions.
Conclusion
People who own a house are on the path to creating their future lives. Indeed, it is a goal for every person in society or for everyone who is alive to have their own house. However, it is often not possible to buy a house with just your savings. The various home loans are a powerful method of providing a house to people with the ambition to own a house.
The availability of home loans and their several advantages can only be enjoyed if the person possesses a good credit score. Contact us today to improve and maintain a good credit score. We’re here to guide you at every step and help you get a loan to purchase your dream home in San Ramon.
