How Credit Scores Impact Your Mortgage

Before purchasing a home, here is what you need to know about credit scores, especially if you’re applying for a first time buyer mortgage or seeking a mortgage pre-approval.

There are multiple home loan programs, and they have different requirements, including the minimum credit scores allowed for getting a loan approval.

For example, Conventional loans require a minimum score of 620 (at the time of this blog post). Government loans, such as VA loans and FHA loans, can go lower. If you’re applying for an FHA loan pre-approval, you may qualify with a score as low as 580.

A lot of people mistakenly think, “I’ve got a 620, so I got the minimum, but that means I’m going to get a really high rate.”

It honestly depends on the loan program.

Government loans, such as FHA and VA loans, are nowhere near as sensitive as Conventional loans to credit scores. This means a lower score does not necessarily result in a substantially higher interest rate on a FHA loan or VA loan. On a Conventional loan, it may. 

For example, 15-year mortgage rates on Conventional loans are not credit-score sensitive. This means scores of 800 and 620, which is the minimum, will get the same interest rate on a 15-year mortgage when it comes to buying a home.

So interest rates and credit scores do correlate but not always in the same fashion that many people believe. That’s why getting a mortgage pre-approval letter tailored to your financial profile is so important. It gives you a clearer picture of your eligibility and the rate you might qualify for, especially as a first-time homebuyer.

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