Main Line Real Estate Mary Beth Hurtado 610-608-3119

What You Need to Know About Credit Before You Buy a Home

If you’re like most people, you’ll need to take out a loan to buy a Main Line home for sale – and in order to get good terms and interest rates on your mortgage loan, you’ll need a decent credit score. But how do you check your credit, and how can you tell if it’s high enough?

Here’s what you need to know.

How to Check Your Credit Before You Buy a Home

Thanks to the Federal Trade Commission, everyone is entitled to a free copy of his or her credit report each year. You can get yours here.

Once you receive your credit report, comb through it to make sure there aren’t any errors – and if there are errors, file a dispute with the agency reporting it.

What Credit Score Do Lenders Want You to Have?

Lenders base the interest rates they’re willing to offer you on how high your credit score is. Scores over 800 are considered excellent, and those that fall between 740 and 799 are very good. Scores between 670 and 739 are good, those between 580 and 669 are fair, and those under 579 are poor.

Every lender is different, but the bottom line is that a handful of points on your credit score can change your monthly payments drastically.

You can still get a mortgage loan with a low credit score. Here’s a quick breakdown:

Conventional loans typically allow you to have a credit score as low as 620, although some lenders might have additional requirements (like lower outstanding debt) if that’s where your score falls on the spectrum.
FHA loans are available to people with a credit score of 500. However, if your score is between 500 and 579, you’ll have to come up with at least a 10 percent down payment. If it’s 580 or higher, you may qualify to put as little as 3.5 percent down.
USDA loans usually require a minimum credit score of 640 to qualify, but sometimes they’ll consider borrowers with lower scores.
VA loans don’t have a minimum credit score requirement. The VA requires lenders to look at your entire financial profile when making a decision. However, many lenders do have minimum credit score requirements.