Checking Your Credit Before Buying Home


How Mortgage Lenders View Credit

Two of the most important factors that mortgage lenders look at is income and credit. Income is important because mortgage lenders want to know that you are able to afford the monthly mortgage payments, your other housing expenses, your minimum debt obligations and make sure that the new home mortgage will not be a strain on you. With credit, the mortgage lender will first check your credit scores to see whether you meet the minimum credit score requirements whether or not you qualify for the particular mortgage loan program you are applying for. Meeting the minimum credit scores is not everything. Mortgage lenders will review your overall credit history on your credit report and will especially check for any judgments, tax liens, public records, credit disputes, and will especially see if you have been timely in making your monthly debt payments for the past 12 months. Checking your credit before buying home is strongly recommended. There are very simple techniques in boosting your credit scores. Simply paying down your credit card balances will do extreme wonders in boosting your credit scores. If you have no credit or little credit, then adding secured credit cards will definitely instantly boost your credit scores. Secured credit cards is the best easiest and fastest way of re-establishing your credit.

Why Lenders Place So Much Emphasis On Credit

Checking your credit before buying home is very important not just for qualification purposes but because it may save you thousands of dollars over the term of your mortgage loan. Many home buyers do not realize that there are simple techniques in boosting their credit scores and improving their credit and that is why checking your credit before buying home is so important. Mortgage lenders view a mortgage loan applicant’s credit and credit history as an indicator of the amount of risk the borrower has. If the mortgage loan borrower has a stellar payment history and high credit score, that is a great indicator that the borrower will continue to make his or her payments on time. Mortgage lenders understand that mortgage loan borrowers may go through periods of bad credit due to extenuating circumstances such as periods of unemployment, divorce, medical issues, or loss of business. Having prior history of bad credit will not impact the mortgage loan applicant’s chances of getting a mortgage loan approval nor will it affect the mortgage loan borrower’s mortgage rates. Mortgage rates are based on the borrower’s credit scores and with conventional loans, the loan to value.  Lenders place much emphasis on credit because the borrower’s credit is the only way they can predict the probability of the future payment predictability of the mortgage loan borrower and the borrower’s credit scores is how mortgage lenders assess risk.  The lower the borrower’s credit scores are, the higher risk the borrower is and the higher mortgage rates that will be charged.

Minimum Credit Score To Qualify For Home Loan

Minimum credit score to qualify for FHA Loans are 580 FICO for a 3.5% down payment home purchase loan. For conventional loans, the minimum credit score required is 620 FICO credit scores. USDA Loans normally require 640 FICO credit scores to qualify. VA Loans, normally require 620 FICO credit scores, however, VA mortgage loan borrowers can qualify for VA Loan with lower credit scores as long as they get an approve/eligible per Automated Underwriting System. Jumbo Loans normally require a 700 FICO credit score and some Jumbo mortgage lenders will require a 740 FICO credit score.


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