Before purchasing a home, here is what you need to know about credit scores.
There are multiple 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 and FHA loans, can go lower.
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, 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 an FHA 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.