What Credit Score Do You Really Need To Buy a House?
When you're thinking about buying a home, your credit score is one of the biggest pieces of the puzzle. Think of it like your financial report card that lenders look at when trying to figure out if you qualify, and which home loan will work best for you. As the Mortgage Report says: "Good credit scores communicate to lenders that you have a track record for properly managing your debts. For this reason, the higher your score, the better your chances of qualifying for a mortgage." The trouble is most buyers overestimate the minimum credit score they need to buy a home. According to a report from Fannie Mae, only 32% of consumers have a good idea of what lenders require. That means nearly 2 out of every 3 people don’t. So, here’s a general ballpark to give you a rough idea. Experian says: “The minimum credit score needed to buy a house can range from 500 to 700, but will ultimately depend on the type of mortgage loan you're applying for and your lender. Most lenders require a minimum credit score of 620 to buy a house with a conventional mortgage.” Basically, it varies. So, even if your credit isn't perfect, there are still options out there. FICO explains: “While many lenders use credit scores like FICO Scores to help them make lending decisions, each lender has its own strategy, including the level of risk it finds acceptable. There is no single “cutoff score” used by all lenders, and there are many additional factors that lenders may use . . .” And if your credit score needs a little TLC, don’t worry—Experian says there are some easy steps you can take to give it a boost, including: 1. Pay Your Bills on Time Lenders want to see that you can reliably pay your bills on time. This includes everything from credit cards to utilities and cell phone bills. Consistent, on-time payments show you’re a responsible borrower. 2. Pay Off Outstanding Debt Paying down what you owe can help lower your overall debt and make you less of a risk to lenders. Plus, it improves your credit utilization ratio (how much credit you're using compared to your total limit). A lower ratio means you’re more reliable to lenders. 3. Don’t Apply for Too Much Credit While it might be tempting to open more credit cards to build your score, it's best to hold off. Too many new credit applications can lead to hard inquiries on your report, which can temporarily lower your score. Next Steps Your credit score is crucial when buying a home. Even if your score isn't perfect, there are still pathways to homeownership. Working with a trusted lender is the best way to get more information on how your credit score could factor into your home loan.
The Best Way To Keep Track of Mortgage Rate Trends
If you’re thinking about buying a home, chances are you’ve got mortgage rates on your mind. You’ve heard about how they impact how much you can afford in your monthly mortgage payment, and you want to make sure you’re factoring that in as you plan your move. The problem is, with all the headlines in the news about rates lately, it can be a bit overwhelming to sort through. Here’s a quick rundown of what you really need to know. The Latest on Mortgage Rates Rates have been volatile – that means they’re bouncing around a bit. And, you may be wondering, why? The answer is complicated because rates are affected by so many factors. Things like what’s happening in the broader economy and the job market, the current inflation rate, decisions made by the Federal Reserve, and a whole lot more have an impact. Lately, all of those factors have come into play, and it’s caused the volatility we’ve seen. As Odeta Kushi, Deputy Chief Economist at First American, explains: “Ongoing inflation deceleration, a slowing economy and even geopolitical uncertainty can contribute to lower mortgage rates. On the other hand, data that signals upside risk to inflation may result in higher rates.” Professionals Can Help Make Sense of it All While you could drill down into each of those things to really understand how they impact mortgage rates, that would be a lot of work. And when you’re already busy planning a move, taking on that much reading and research may feel a little overwhelming. Instead of spending your time on that, lean on the pros. They coach people through market conditions all the time. They’ll focus on giving you a quick summary of any broader trends up or down, what experts say lies ahead, and how all of that impacts you. Take this chart as an example. It gives you an idea of how mortgage rates impact your monthly payment when you buy a home. Imagine being able to make a payment between $2,500 and $2,600 work for your budget (principal and interest only). The green part in the chart shows payments in that range or lower based on varying mortgage rates (see chart below): As you can see, even a small shift in rates can impact the loan amount you can afford if you want to stay within that target budget. It’s tools and visuals like these that take everything that’s happening and show what it actually means for you. And only a pro has the knowledge and expertise needed to guide you through them. You don’t need to be an expert on real estate or mortgage rates, you just need to have someone who is, by your side. Next Steps Have questions about what’s going on in the housing market? Let’s connect so we can take what’s happening right now and figure out what it really means for you.
Don’t Let Your Student Loans Delay Your Homeownership Plans
If you have student loans and want to buy a home, you might have questions about how your debt affects your plans. Do you have to wait until you’ve paid off those loans before you can buy your first home? Or is it possible you could still qualify for a home loan even with that debt? Here’s a look at the latest information so you have the answers you need. A Bankrate article explains: “Roughly 60 percent of U.S. adults who have held student loan debt have put off making important financial decisions due to that debt . . . For Gen Z and millennial borrowers alone, that number rises to 70 percent.” This includes one of the biggest financial decisions you’ll ever make, buying a home. But you should know, even with student loans, waiting to buy a home may not be necessary. While everyone’s situation is unique, your goal may be more within your reach than you realize. Here’s why. Can You Qualify for a Home Loan if You Have Student Loans? According to an annual report from the National Association of Realtors (NAR), 38% of first-time buyers had student loan debt and the typical amount was $30,000. That means other people in a similar situation were able to qualify for and buy a home even though they also had student loans. And you may be able to do the same, especially if you have a steady source of income. As an article from Bankrate says: “. . . you can have student loans and a mortgage at the same time. . . . If you have student loans and want a mortgage, there are multiple home loan programs you might qualify for . . .” The key takeaway is, for many people, homeownership is achievable even with student loans. You don’t have to figure this out on your own. The best way to make a decision about your goals and next steps is to talk to the professionals. A trusted lender can walk you through your options based on your situation, and share what’s worked for other buyers. Next Steps Lots of other people with student loan debt are able to buy their own homes. Talk to a lender to go over your options and see how close you are to reaching your goal.
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