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Is your credit fair, good, or excellent?
Answers To Commonly Asked Credit Score Questions:
Generally speaking the tiers of credit in the mortgage industry start at a fair credit score being 700 and the tiers move up or down from there in increments of 20 points. Every tier you improve can (but won’t always) come with a better interest rate and lower payment:
If you have 20% down payment saved and good credit, Conventional Loans will usually be your best option. If you have less saved or need down payment assistance, likely FHA will be your best option.
Home lenders use a different scoring model that typically is a lower score. Lenders use a mortgage scoring model which is typically lower than a consumer credit score you often see on credit websites.
While the credit scores typically range between 400 and 850, each loan type has a different measuring stick for what a good score is.
Below we’ll look at what a good score is for the most popular types of home loans in the US. The three we’ll cover are FHA loans, VA loans, and Conventional Financing loans. Each has a different range for what is good enough to qualify and what is ideal for the lowest rates and payments.
FHA loans are not as credit score sensitive as Conventional loans. To qualify for an FHA loan, you only need a 580 credit score.
However, to get the best deals on an FHA loan, you will want to have around a 640 credit score or better. 640 is considered good credit for an FHA loan. The rate and payment you receive doesn’t improve drastically for higher credit scores.
FHA often has quite a few options for getting help with coming up with the down payment. To get these, a good credit score is typically 680, but this can change based on where you’re buying a home. Down payment programs are typically specific to more local areas like a city or county, so these can vary area by area.
Conventional loans are very sensitive to credit scores. Every 20 point change can drastically move your rate and payment.
A good score for Conventional loans is 740. Below this, FHA might be a better choice unless you have 20% of your own funds for down payment. To get the very best deals (lowest rates and payments) on Conventional loans, a 760 or higher score is needed.
VA, like FHA, is not as sensitive to credit score movements. To qualify, you’ll typically need a 580 score at minimum. However, you’ll also need to have been a Veteran of the US armed services to qualify and meet other eligibility criteria set forth by the Veterans Administration.
A good score to get the best rates and payments for VA loans is a 640 credit score. Your rates and payments will get slightly better if you get to 700 or higher, but not by a large amount compared to the Conventional loan. The VA loan is one of the best loans in the world and if you can qualify, you will enjoy some of the best loan terms available in the United States. This includes the option of no Down Payment or Mortgage Insurance.
For homebuying, there is typically no difference for any score over 760. The one exception is Jumbo home loans which is when the loan size is too big for a loan to be FHA or Conventionally financed.
This is technically true, however, VA does not offer the home loans themselves and relies instead on banks to provide them and the VA to only insure them. Most banks have added a requirement of at least a 580 credit score to qualify.
The short answer – No. Mortgage credit checks (sometimes called pulls) are categorized differently from a credit card requestor pulling your score. The bureaus understand that opening up a house loan is considered good debt, where opening up a bunch more credit cards is not.
Conventional interest rates are typically worse than FHA rates at that credit score. Conventional would be the best option only if you have 20% down payment saved. This allows Conventional loans to avoid mortgage insurance, where FHA always requires it.
However, this is right on the line and in many cases the best idea is have a professional put them side-by-side to see which comes out as the better, more affordable option. Often it comes down to more than just which option has the lower payment and often people plan to refinance in the first 2 years once they can get their score a bit higher. In this situation going the Conventional route will save you because FHA charges an up front MI cost that they tack on to your loan and can be very heafty.
Typically a 680 credit score will be enough to qualify for down payment help, but this varies by program and programs are offered regionally. You’ll need to check within your area to see if a program is available. Contact us and we’d be happy to get you a list of programs available to you in your area.
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