You don’t have to have perfect credit in order to buy a home. Well, in the aftermath of the housing debacle around 2008 you might have needed perfect credit. Too many lenders got into the subprime mortgage business not documenting any income and not requiring credit scores contributed to the end of many successful banks yet today those lenders and loan programs that made such loans are no longer around. But lenders did slowly move back into the mortgage market and while they stopped making loans to those with poor credit they did gradually move back to the established lending guidelines mortgage companies used for decades.
But it can’t be stated more clearly- you don’t have to have perfect credit. Or even excellent credit. Credit profiles today are viewed by lenders using credit scores. Excellent or Very Good credit is indicated with a credit score of 740 or higher. Scores range from 300 to 850 on the credit score scale. Poor credit is indicated with a credit score of 580 or lower. But at what point do lenders turn down a mortgage application do to a score? Lenders can have their own minimum standards but most loan programs ask for a minimum score of 620, others as low as 600. These scores are considered “below average” yet lenders make loans using these scores on a regular basis.
The first point to make is to not judge yourself. Let a loan officer look at your credit report and scores to tell you exactly where you stand. Most every mortgage lender uses a matrix to assign interest rates and loan approvals based upon a combination of a down payment and a score. The lower the score, the higher the rate might be. For those with less than perfect credit sometimes a larger down payment will help obtain a loan approval. Just let your loan officer explain your options and if you can’t buy right now your loan officer can put you on a path to homeownership by making a few tweaks to your credit report. However, most who think they may not qualify based upon credit are surprised when they hear they really can be.
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