The Minimum Credit Score for a First-Time Homebuyer
When looking for information on what the minimum credit score is in order to get a good home loan, you'll usually find different answers online and from experts. Depending on economic factors, that particular FICO score will fluctuate. As of 2011, things have changed somewhat with higher expectations. Nevertheless, recent loan experts quoted on the HomeBuyingInstitute website say you can still get some loans with credit scores lower than what you might think.
Other People Are Reading
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Expectations From Lenders
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You need to have as high a credit score as possible in order to get a decent home loan with good interest rates. The U.S. Department of Housing and Urban Development (HUD) says that it's not always easy to improve your credit score in order to get a loan. However, if you continue to pay your bills on time during a year, your credit score can improve dramatically. HUD reminds future homebuyers to never buy more than you can afford. And if you see any mistakes on your credit report, contact the three credit bureaus immediately to have the errors amended (see Resources).
Minimum Credit Score
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According to a November 2010 Bloomberg article quoted on HomeBuyingInstitute.com, Federal Housing Administration (FHA) loans now require a minimum credit score of 640 compared to a previous 620. The top lenders that now require this higher score are Wells Fargo and Bank of America. A 2009 article cited on HomeBuyingInstitute.com from ThinkGlink.com says that a score in the lower 600s makes it easier to get an FHA loan but won't help you with a regular home loan without a score of at least 660.
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Credit Score for Best Interest Rates
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Even if your credit score is in the 600s, you won't necessarily get the best deal because interest rates will be much higher. If you want to get the best interest rates, HomeBuyingInstitute.com suggests that you need a score of at least 760. A 2010 article from USNews.com cited on HomeBuyingInstitute.com contradicts this, however, and says a score of 730 will still get you the best interest rates.
More to Consider
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When buying your first home and attempting to get a loan, you also have to consider more than just your credit score. Also calculate what your income is in relation to the loan you're getting. If the lender sees that your income is low, the loan may be refused. Additionally, lenders look at your debt-to-income ratio, dividing your gross income with the amount of debts that you owe.
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References
Resources
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