Mortgage is the main type and most used form of credit in the world today. When searching for the best available terms for mortgage facilities, an individuals credit history and credit score to be specific is the major determining factor. Mortgage credit score is subjected to the same scale as when determining the overall credit score.
What is considered a good credit score for a mortgage loan?
Generally, a credit score between 550 and 850 would at any time allow and qualify you for a mortgage. Home ownership is very expensive as the costs associated are very high. A credit score above 700 is considered as a good credit score for a mortgage and a home loan. At this credit score, a borrower easily qualifies for a mortgage from different lenders at fairly lower interest rates with longer credit periods. A 30-year mortgage for instance, would be charged an interest between 1 and 1.5% for a good credit score bearer. A good credit score and the mortgage terms and rates vary with different credit agencies, lenders and property owners.
A low credit score mortgage is rare to find but not a complete impossibility. Lenders are in business and are always looking for opportunities to reap maximum benefits and returns. Low credit scores scare away lenders and most of them decline mortgage applications from such borrowers due to the risks involved.
Good credit score to buy a house
Nevertheless, a credit score of between 580 - 600 is the lowest credit score that can get a borrower a mortgage. Such mortgage comes with very unfair terms and very high interest rates of between 3.25 and 5%. Shopping for a low credit score mortgage is very hectic and difficult,as most lenders prefer not risking their resources. It is advised to ensure that your credit score is above the lower set credit score mortgage limit before embarking on mortgage shopping.
There is no set specific standard showing the interest rates for different credit scores. The financial environment is a dynamic setting which keeps on changing in reaction to different external factors such as inflation, world economic and structural events just to mention but a few. For these reasons, setting standard mortgage rates matching credit scores would be close to ideal.
Considering the several credit reporting agencies, we can approximate and match different credit scores to interest rates they have been attracting in the recent past. We can simplify this as follows:
Credit score Range : Interest Rate
- 580 - 599 : 4.25%
- 600 - 339 : 3.25%
- 640 - 680 : 2.25%
- 681 - 699 : 1.25%
- 700 – 739 : 0.5%
- 740+ : 0.25%
On a higher note, 650 stands as the average credit score to get a home loan or easily get you a mortgage of your choice. With this average, a mortgage shopper will have an easy time getting approvals from lenders. This score allows for fair credit terms and considerably lower interest rates of between 1 and 1.5%. An average credit score should be the target for anyone aiming to control his or her mortgage arrangements and plans. Timely bill payments, serviced loans, active credit cards, clean credit reports free of error are some of the steps towards an average mortgage credit score.
What is a good fico score for a mortgage?
FICO, being the largest and commonly used credit reporting agency, many other agencies refer to its scale. FICO has since expended the circumference of determinants for a mortgage credit score. Some of the additional things considered in arriving at the mortgage credit score include, child support payments if any, payday loans, public records and rental payment history.
These factors are included in the FICO 8 mortgage credit score model. A FICO score equal or above 660 is regarded as a good mortgage credit score for a home loan. Most credit reporting agencies refer to this FICO score when determining their respective acceptable mortgage credit scores.
A good credit score is thus fundamental in the journey to owning your dream home through mortgages.