According to Fannie Mae, 90% of buyers either don’t know what credit score lenders are actually looking for or assume it needs to be higher than it really is.
That’s a big deal, because it means many potential homebuyers may be holding back unnecessarily, thinking they don’t qualify. You might even be one of them. But the truth is, the requirements may be more accessible than you think. Let’s take a closer look at what the data says about credit scores and the homebuying process.
There’s No One Magic Number
There’s no one-size-fits-all credit score required to buy a home, which means there’s often more flexibility than people realize. Take a look at this chart showing the median credit scores of recent homebuyers across different types of loans:
Here’s what’s key to understand: credit score requirements can vary, and there’s no universal cutoff point. That means you may have more options than you think, and the door to homeownership might be more open than it seems.
The best way to get clarity is to connect with a trusted lender who can walk you through your specific situation. As FICO puts it:
“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…”
Why Your Score Still Matters
When you’re buying a home, lenders look at your credit score to understand how you manage money. They want to know if you make payments on time, how you handle debt, and more.
Your score can influence the types of loans you qualify for, the terms you’re offered, and even your mortgage rate. Since rates have a big impact on how much home you can afford, your credit score is especially important in today’s market. As Bankrate explains:
“Your credit score is one of the most important factors lenders consider when you apply for a mortgage. Not just to qualify for the loan itself, but for the conditions: Typically, the higher your score, the lower the interest rates and better terms you’ll qualify for.”
That doesn’t mean your credit has to be perfect. Even if your score isn’t exactly where you want it to be, you may still be able to qualify for a home loan.
Want To Boost Your Score? Start Here
If you speak with a lender and decide you want to improve your credit score, which could help you qualify for better loan options and terms, there are a few smart steps you can take according to the Federal Reserve Board:
- Make Payments on Time: This is one of the most important things you can do. Lenders want to see a strong history of on-time payments across all your bills, including credit cards, utilities, and even your cell phone. Consistency shows that you’re responsible with your finances.
- Pay Down Existing Debt: Using less of your available credit makes you appear less risky to lenders. The lower your balances, the better your chances of qualifying for favorable loan terms.
- Check Your Credit Report: Get a copy of your credit report and review it for any errors. If you find any inaccuracies, take steps to correct them. Fixing mistakes can have a positive impact on your score.
- Avoid Opening New Accounts: It might be tempting to open more credit cards to build your score, but it’s best to wait. Too many new applications can result in hard inquiries, which may temporarily lower your score.
Bottom Line
You don’t need a perfect credit score to qualify for a home loan. However, a higher score can help you secure more favorable loan terms. The best way to understand where you stand and explore your mortgage options is to connect with a trusted lender. Get in touch with us to know more!
