Among the factors lenders use when assessing mortgage candidates is a credit score. Although the credit score for most conventional mortgages is not set in stone, it is thought that if yours falls between 620 and 640 you will be able to get a mortgage; the higher the score the better for approval and rates. For a mortgage, therefore, is 700 a reasonable figure?
A 700 credit score indicates that an applicant is creditworthy as the credit score is a numerical depiction of their creditworthiness and runs from 300 to 850.
Credit ranges go from 300 to 850. A score of 700 falls in the good to outstanding range depending on the scale used. It tells lenders that a person is probably going to make monthly timely payments and has low credit risk. On credit cards as well as loans, 700 or higher credit scores provide the greatest rates. The truth is that hardly more than twenty percent of the American population have such credit ratings. With a 700 credit score, you will be able to access most of the mortgage products; the interest rates will be only slightly more than those paid to those with 700, 800 mid 700s credit scores.
The absolute minimum required for a mortgage is naturally low, but several crucial criteria also have to be satisfied.
Better interest rates are given if your score falls between mid 600 and high 600s, even though some lenders are ready to provide credit cards to candidates with a FICO score of 620 and less. Given the guarantee of Fannie Mae or Freddie Mac, a FICO score of 700 meets the minimum criteria for conventional loans. It covers adjustable and fixed-rate loans. Using your score, you may benefit from VA loans and FHA loans, which can call for as little as 3%. These are no-down payment house loans.
A 700 credit score can mean a lower interest rate
Any credit score of 700 or above enables one to qualify for a mortgage while at the same time receiving lower interest rates. This can potentially be a savings of tens of thousands of dollars throughout your home loan. In general, the interest rate on your credit depends on the rank you hold, and the higher the rank is the lower the interest rate. 5800 and above put you in the range of rates that are the lowest that you are likely to find in the market. Although a 700 is still not a perfect score to place one in the excellence category, it is perfect to get one into a position to get the best market rates on insurance premiums. The particular percentage varies depending on the type of credit scores that your lender uses, other details such as your income and debt status, or the current market trends.
Should One Get a Higher Score Before Purchasing?
If you happen to be over 700 then you can be in the prime mortgage category and get good rates. In case your number is just a bit below or around 700, it may be a good idea to wait a few months before applying for the mortgage and strategizing to push this number up. This puts you in a position to guarantee that you truly meet all requirements for the most preferred rates for any doubt. If you have a score of 740 and above, it is time to go house shopping and get your mortgage application approved, knowing there are very good deals out there for you.
The overall impact of mortgages on credit scores
But an essential point one should remember is the fact that the mere application for a mortgage temporarily reduces your credit score. The extent of the effects depends on the rest of your credit profile and utilization ratio, but do anticipate a drop of between 10 to 50 points when you apply for a loan. This is regarding the hard inquiry that the lenders undertake when you submit your loan application. No need to worry about a few months after closing on your home, the score will begin to recover and get to the near pre-mortgage number in about six months.
This will thus be followed by ways on how you can improve your credit score.
In particular, if your score is below 700, you should increase it to improve your chances of being approved for a mortgage. Tips include:
- Subsequently, ensure all the bills that are due are paid in full every month.
- Ensure that credit card balances are below such levels as 30% of the credit limit.
- Restrict issue of new credit applications
- Other tasks: Fixing mistakes on credit reports
- However, it is also important to keep old accounts active
The takeaway? A 700 credit score is enough to get you approved for purchasing a house and getting a mortgage for it, but a score over 740 places your application in the best standing and allows you to lock in at the best possible interest rate. However, good credit has its benefits and you are likely to save more on mortgages since you will be paying the house for many years.
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