What Credit Score is Needed to Buy a House in 2021?

by | Feb 1, 2021 | Blog

Are you looking at the housing market with it’s incredibly low rate and wondering if this is a good time to purchase your home? One of the first questions you should ask is “What is my credit score?”

Here’s what Jordan Crist from Crist Credit Consulting, an expert on this subject says:

Depending on a variety of variables, your credit score is calculated to give home loan originators a base-level idea of your ability to purchase and pay home loan payments. The better your credit score, the more substantial of a home you are eligible to purchase. This means having a low credit score can hinder your ability to gain a respectable home loan interest rate – or put your home buying dreams to a stop.

In 2020, the average minimum credit score required to successfully complete a home purchase can range from 580 on the low end to 640 for some lower-rate loans.

Jordan Crist

Crist Credit Consulting

Minimum Credit Score Requirements For Different Loan Types

Are you nervous that your current credit score may hinder your ability to purchase the home of your dreams? There are many options available for home buyers in 2021 to help you gain the equity needed to buy a house:

FHA Loan

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Average Minimum Score: 580

For individuals who meet the specific qualification of requirements and are facing financial and economic hardship, FHA loans offer the best chance of home purchasing with low credit scores. FHA loans are backed and financed by the Federal Housing Association and are designed to help those who may not have the score necessary to gain access to conventional home loans.

FHA 203K Loan

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Average Minimum Score: 620

FHA 203K loans are similar to FHA loans in that they are backed by the Federal Housing Association. However, these home loans are often taken out with the intention to purchase and renovate homes that require updates for livability.

Conventional Loan

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Average Minimum Score: 620

A conventional home loan is the most common home mortgage sought by home buyers in the United States. Not backed by any governmental entity, these loans often originate through banks or home equity companies, and feature a larger variable of interest rates and payback requirements.

The average minimum score for accessing Conventional Loan funds fall in the middle of the credit score range.

VA Loan

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Average Minimum Score: 620

VA loans are special home mortgage loans that are backed by the Department of Veterans Affairs. These loans require a bit higher credit score to access, and are limited to individuals who have served in the US Military and have not faced a dishonorable discharge.

USDA Loan

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Average Minimum Score: 640

For some rural and suburban homeowners, the USDA offers competitive loans with great interest rates that can lower your overall payment cost over time. If you are eligible for this special home loan program, it is beneficial to learn how a USDA loan can help you purchase a home with low rates.

Elements To Consider For Your Credit Score

As you can see, if your credit score floats at or below the 500 mark, it may be difficult for you to access the finances needed to purchase a home. However, all hope may not be lost. Each banking and governmental institution uses a variety of criteria to mark if individuals or families are eligible for home loans. Coming clear with your banking or loan institution about your current and past financial situation may work in your favor to convince lenders to take a chance on your home loan.

To increase your chances, continue to keep in mind the following factors of your financial situation:

  • Keep a decreased loan-to-value ratio.
  • Ensure that your Debt-to-Income ratio is low (DTI).
  • Continue to keep up with your credit and pay your payments on time.
  • Show employment history and financial sustainability.
  • how employment history and financial sustainability.

By showing that you are working hard to boost your financial situation, you can increase your chances of receiving a loan to help you purchase the home of your dreams.
To learn more visit the expert on this subject Crist Credit Consulting.

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