What credit score do mortgage lenders use and other than that what is needed to buy a house?

What credit score do mortgage lenders use and other than that what is needed to buy a house?

The minimum credit score you’ll need to buy a home also depends on which credit score mortgage lenders are looking at. The FICO score, developed by Fair Isaac, is the most popular scoring model in the industry. Approximately 90% of mortgage lenders use this to determine your credit score and decide whether or not to approve you for a loan.

The VantageScore is an alternative to FICO scores that’s rapidly gaining in popularity. The VantageScore system was developed by Experian, Equifax and TransUnion and it considers things like your payment history, the amount you owe and the age of your accounts.

Both VantageScores and FICO scores range from 300 to 850 but because the two models use different algorithms, it’s possible for your scores to vary widely.

Apart from your credit score, lenders will look at your employment and yearly income to make sure that you will be able to make payments on time each month. They are looking to see if you have a steady source of income.

Lenders will also look at the area you are looking to purchase a home in because there are outside factors that might make increase the risk thereby increasing the credit score needed to secure a mortgage loan. As you can tell, there are many different requirements to buy a house so do not take the decision to become a homeowner lightly.

What credit score do I need to buy a house?

What credit score do I need to buy a house?

There’s no concrete answer, but experts say that with a score of 660 can help you qualify for a home loan. Scores of 660 or lower might mean ending up with a high interest rate and poor loan terms.

To qualify for an FHA loan, which often requires only 3.5% of your purchase amount as a down payment, you’ll need a minimum credit score of 580. However, because many lenders use underwriters that assume the financial risk, you may be able to get around the minimum if the underwriter agrees to an exception if you carry minimal debt or can prove substantial savings.

Right now, the average American’s credit score is 695, which is relatively high. For top-notch rates, aim to improve your credit score to around 740 before applying for a mortgage.

• Most conventional mortgages require a credit score of 620 or higher.
• Loans backed by the Federal Housing Administration require a minimum score of 500 to qualify for a 10% down payment and a minimum 580 for 3.5% down payment.

• USDA loans require a credit score of 640 or higher
• Veteran Affairs loans require no minimum credit score.

How To Buy A House

Buying a house can be a bewildering experience for most people. It’s a complex process involving many disciplines, each with their own unique vocabulary making the process nearly impossible to master.

Here are five, easy-to-execute pieces of advice  from my new book Home Buying in 30 Minutes, that will go a long way toward ensuring you get a good deal on your next home.

1. Hire a real estate attorney.

This is an elective expense in some areas and there is a temptation to try to save a few hundred to a thousand dollars by not hiring an experienced real estate attorney. Some people use an attorney friend or relation to represent them in a transaction for free. This is a risky and potentially costly error.

It’s well-known that you have to spend money to make money. Sometimes you also have to spend money to avoid disaster.

U.S. real estate law hasn’t changed appreciably in the last three hundred years so many attorneys wrongly think it’s simple. It might be simple, but it definitely isn’t easy. Representing buyers or sellers in a real estate transaction involves knowledge of real estate law, knowledge of local customs, experience in negotiations and a good deal of diplomacy. Nearly every real estate attorney has a story about a transaction that almost went south because the attorney for the other side was unfamiliar how real estate deals are transacted in their area.

Their value is heightened if you don’t know a real estate agent, mortgage broker or home inspector. A local attorney will know who the best professionals in the area are and can refer you to them. Assembling a dream team of professionals to advocate for you goes will greatly increase the likelihood that you’ll get a good deal on a great property.

2. Hire a real estate agent who has a lot of experience.

You’ll want to work with an agent who has a lot of experience in the area you’re looking in. Experience counts for a lot. They will have a much better understanding of that market and the community than someone who primarily works in another market. A local agent is much more likely to have relationships with other local agents, which can make the deal go more smoothly. Plus, they have a reputation to protect and will be more motivated to make sure you’re a satisfied client.

3. Get pre-approved by a local mortgage broker.

Competition among businesses is always good for consumers. Mortgage brokers have relationships with dozens of lenders, each with many different mortgage programs. A mortgage broker can shop around among hundreds of programs to find the right one for you. A loan officer at your local bank only has a handful of mortgage products. When you get a quote from a mortgage broker, you can be sure you have a competitive rate and you can always call your local lender to see if they can beat the deal you get from the mortgage broker before you lock in your rate.

Mortgage brokers rely on referrals from real estate agents and others for business. They quickly develop (or lose) a reputation for making sure they can close loans on time. Big, national lenders are famous for not closing on time. If a national lender fails to close on time, annoying and inconveniencing everyone involved in the deal, it doesn’t really impact their overall business. Mortgage brokers have more skin in the game and can’t afford to harm their reputation that way, so they work harder to ensure your loan closes on time. 

4. Don’t let yourself fall in love with any property.

Remember, buying a home is a business transaction. Try to keep emotion out of it. The time to fall in love with a house is after you buy it and make it your own. Most people can think of a time when they made a decision they regret when they were swept up in emotions. Cooler heads prevail in real estate.

5. Don’t hire the cheapest home inspector.

It is impossible to find and diagnose every problem in a house while walking through it for a few hours. Still, that’s what many people expect of their home inspectors. Look for an experienced local inspector who will spend as much time as it takes to find out everything he/she can and put it into context for to you. Done right, a home inspection can be a fantastic educational experience that should leave you knowing your property much better. In most fields, you get what you pay for and who can afford a cheap inspection?

 In the homebuying game, it pays to know the rules.

What is a house mortgage?

What is a house mortgage?

Before we get into the details of buying a house, getting a mortgage, and what your credit needs to look like, let’s back up and lay out exactly what a mortgage is. A mortgage is a loan specifically used to finance the purchase of a home.

A house mortgage is likely the largest loan you will ever take on and that is why they have multiple parts and they can last 15-30 years. Mortgages include collateral, a down payment, taxes and insurance. It is important to keep these different parts in mind before deciding whether you can take on this much debt. Once you’ve decided to take the plunge, you’ll need to know what it’s going to take to get your dream home.