When you’re thinking about buying a home, your credit score is a very important number. So what is the magic number you need in order to buy a house?
The short answer is, a minimum score of 580. Yep, those three digits are what’s standing between you and your homeowner dreams. But why does it need to be 580?
You see, before the 2007-2008 housing market crash, it was much easier for people with poor credit to find subprime loans, which was part of the reason we had a crash. But in 2010, the Dodd-Frank Wall Street reform became law and tightened up the requirements in the mortgage industry. Now, lenders are much more heavily regulated and qualifying for a mortgage is a little more difficult.
Lenders look at your credit score because it’s a good measure of your overall financial history. Basically, it tells the lender the probability that you, if extended a loan, will be able to pay it off. A person with a high credit score is more likely to pay off debts, where a person with a low credit score is less likely.
But because your credit score is based off a number of factors, like your payment history, amounts owed, length of credit history, types of credit used, etc., most people don’t know their credit score until they apply for a loan. So what should you do?
Fill out that mortgage application
Because when it comes right down to it, everyone’s situation is different. Even if you have a lower credit score, lenders can look at other compensating factors to reduce the lender’s risk, and, depending on your circumstances, you may just get approved. But you won’t know where you stand until you sit down and talk to a lender.
We’d love to get you in touch with the rockstar lenders we know and trust. They’ll be able to tell you, probably in about 20-30 minutes, where you stand. They can also give you great advice on how to raise your credit score and get yourself in good standing to apply for a loan.
If you’d like to learn more about your credit score and take that first step in homeownership by talking to a lender, give us a call. We’ll chat with you a little about your expectations, your timeline, and get you in touch with one of our trusted lenders, so that you can feel confident you’re on a good path to the home of your dreams.