I want to buy a house…… How High of a Credit Score Do I Really Need?

Everyone is speaking about the American economy these days: What’s gone wrong, who’s to blame and how to fix it? Basically, it comes down to irresponsible, greedy people who gave too much trust to unqualified loan applicants in order to make some fast money. As a result of this fiasco, there’s a lot less trust to go around when you go looking for a mortgage. Back in the days when bankers were busy creating this increasingly dire economic crisis, your credit score, if above a certain mark (around 620-650 by most estimates) ensured you both qualified for and received interest rates on the money you borrowed. Times were simple. Approval was quick and easy. Loan officers weren’t probing so carefully or too deeply in to your financial background. So long as you could provide that minimum credit score, your next move was to choose the new carpets. I reminisce over all of this to illustrate how things have changed for you, the Prospective Homeowner. That minimum score of 620-650 is sadly no longer the ticket to home ownership like it was in the past. While scores in these ranges may still constitute an approval, it’s typically a much less desirable one, requiring more money at closing, in fees and over the long term of the loan in interest rates. To be excused from these expensive options, you credit score will need to find its home in the 720-750 range. As I mentioned, bankers found their way into these problems by extending too much trust. This trust is still obtainable, but only after greater scrutiny of a variety of financial indicators on your loan application. If you hope is to be approved for a mortgage with reasonable terms, you may want to examine your credit report and clean it up a bit. Often credit reports contain errors or items which can be deleted, with a little work. Having a good deposit also encourages trust in your commitment to own a home. Finally, creditors will examine your debt to income ratio. This can be improved by paying down debts, earning more, or ideally both. In summary, it’s important to understand having a certain credit score is not the only element you’ll need for getting into your new home. Times are lean, trust is low and scrutiny is high. You can improve all the factors involved with a bit of time and effort. Home ownership is still a worthy goal and we wish you the best in your pursuits.