What Credit Score You Need to Buy a Home?
If you are planning to purchase a home in Baja California, you will most likely need to get a home loan. According to a survey conducted by the National Association of Realtors, about 88 percent of homebuyers financed their property purchases in 2014. When you are applying for a mortgage, the lender will look at a few things in order to determine your eligibility, one of which is your credit score. Having a good credit score does not only increase your chances of getting your mortgage application approved; it can also have an effect on your interest rate.
What is a Credit Score?
A credit score is also commonly referred to as a FICO score, and it is a number ranging from 300 to 850 that indicates the creditworthiness of a person. In this case, creditworthiness means the likelihood that the person will be able to pay off a loan. If you have a credit score of 850, a lender will have the impression that you will almost certainly pay off your debt. On the other hand, a credit score of 300 suggests that you will most likely miss payments.
What Credit Score You Need to Get a Mortgage?
There is no one-size-fits-all answer to this question. Credit score requirements for home financing can vary significantly from one lender to another. For instance, Ellie Mae revealed that the average credit score on traditional home-purchase mortgages that were eligible for sale to Fannie Mae and Freddie Mac in 2016 was 754. However, the average credit score for home-purchase loans at the Federal Housing Administration in May, 2016 was 686. Basically, you will stand a chance of getting a mortgage if you have a credit score of 660. It is possible to find lenders that offer loans to homebuyers with poor credit scores, but you have to be prepared to pay a very high interest rate.
How Will Your Credit Score Affect Your Mortgage Interest Rate?
When you are getting financing to buy a home in Baja California, you need to have a good credit score to get a low interest rate. A lender will offer you the lowest mortgage interest rate if your credit score is between 760 and 850, because there is minimal risk involved. If you have a credit score of 500 to 580, you can expect to pay the highest interest rate.
In order to get a home loan with a low interest rate, you have to make sure that you have a good credit score. If your credit score is low, you can try to improve it by paying off your debts and controlling your spending.
By: Sally Writes