Acceptable Credit Score for Mortgage
When we talk about acceptable credit scores for mortgages we run into a few problems, the first being what is “acceptable” and the second being that every lender interprets credit scores differently. We can, however, make a few general observations to help guide us in our search.
To be accepted by basically all lenders and get the best interest rates you need a score of 720 or above.
For acceptance at almost everywhere, but with notably higher interest rates, any score above 600 will do. This is an acceptable number at most financial institutions and in the higher range the rates won’t be that terrible.
For scores between 500 and 600 you may still be able to find places that will accept your mortgage application. The problem is that your interest rate will definitely be very high.
If your credit score is under 500, almost everyone will find you to be too much of a risk and won’t accept your application. You’ll really need to raise your credit score before obtaining a home.
What else do mortgage lenders consider?
Even if you have a low score, if you are determined to obtain a home loan there is some hope. Most will still look at a wider scope of your finances like your income and your debt to income ratio. The good news here is that if you get your debt down by paying down balances this will not only help directly on your application, but will help raise your credit score as well!
Once you pay down these accounts do not close them! It looks good on your history to have accounts that you have had for a while, and your open accounts raise the amount of credit available to you. This with a low balance is a good thing.
Because of all those factors mixed with lenders past experience and judgment it’s hard to say what will be an acceptable credit score for mortgages everywhere. The best advice is to clean up your credit report the best you can, pay down balances, and talk to some professionals and see what happens.