Buying a home in Park City, Utah? Here’s what your credit score should be…
Credit scores play a key role in buying a home. Lenders use credit scores to assess whether to approve your loan or not. To qualify for a mortgage loan, homebuyers need to meet the required credit score by the lenders.
If you’re in the market to buy a house in Park City, Utah, it’s important to know the credit score you need to have to buy your dream home.
What is a credit score ?
A credit score known as FICO score indicates your creditworthiness as a homebuyer. Major credit reporting agencies such as TransUnion, Equifax, and Experion determine your credit rating or score based on your financial history.
Then, you are assigned a number between 300 and 850. The higher the number, the better your chances of securing a mortgage and favorable interest rates.
Factors that can affect your credit score are your payment or credit history, your outstanding debt, the length of your credit, new credit you apply for, and the type of credit you use.
What credit score is needed to buy a house?
A credit score of 620 usually qualifies you for a home loan. However, various mortgage lenders require different minimum credit scores. The credit score required to buy a house also depends on the type of mortgage you apply for. So whether your credit score falls below the generally accepted minimum of 620 or the lender requires a higher score, there are options that can suit your circumstance.
580 credit score
• FHA loan. Insured by the Federal Housing Administration, an FHA loan can qualify a potential homebuyer with a minimum credit score of just 580. The minimum score also allows you to put a down payment of only 3.5% of the home’s asking price instead of the usual 20%. Meanwhile, a score of between 500 and 579, or just below minimum, can still be acceptable if the borrower agrees to make a 10% down payment on a home.
620 credit score
• Conventional loan. Requires a credit score of at least 620. If your score is 740 or higher, you can make lower down payments and get a lower interest rate. This type of loan is not backed by any government agency but it is the most common type of mortgage.
• VA loan. Backed by the Department of Veterans Affairs for qualified veterans, active service members, and eligible spouses. While VA loans don’t have a set minimum credit score, lenders are instructed to exercise their judgment. Most lenders favor a score of low to mid-600s.
640 credit score
• USDA loan. For homebuyers who prefer to live in rural areas or in the outskirts of the suburbs, USDA loans make it possible with a minimum score of 640. The home loan program by the United States Department of Agriculture does not require any down payment, offers low mortgage rates, and provides reduced mortgage insurance, making it an affordable option for homebuyers.
680 credit score
• Jumbo loan. If you’re shopping for luxury homes, a jumbo loan is a good option. Exceeding the limits set by the Federal Housing Finance Agency (FHFA), jumbo loans grant larger-than-normal sums. Also called as non-conforming loans, jumbo lenders require a minimum score of 680 due to the higher risk that comes with providing a larger amount.
How to improve your credit score
Understanding the circumstances that can affect your credit score is the first step to improve your numbers. Look for websites that can help you keep track of
your credit scores. Settling your bills on time, paying down credit card debt, and avoiding applying for a new line of credit are just some fixes that can raise your credit scores.
For professional coaching on how you can improve your access to financing your dream home in Park City, work with Team Schlopy, your real estate expert in Park City, Utah. Call us today at (435) 640-5660.