What Credit Score Does One Need for Purchasing a Home for $250, 000?
One of the greatest accomplishments many homeowners value is owning a house, particularly considering their $250000 investment. To save and have a mortgage approved for such a sum, however, is more difficult than stated. Most lenders also consider your credit score as another factor before lending you money. Therefore, the inquiry that can be made is what credit score one needs to buy a property costing $250, 000.
The Minimum Credit Score
Most lenders now apply at least a 620 credit score for a regular conventional loan. Those with scores of 580 or less are accepted by some of the lenders, but there are certain requirements including needing to pay down 20 to 25%. Therefore, if your score is less than 620, the FHA loan will be more appropriate for you as you only need 500. On the other hand, if you are applying for an FHA loan you will have to pay upfront mortgage insurance.
The Ideal Credit Score
To qualify for a mortgage, one must have a minimum credit score of 620; nonetheless, scoring over 740 will get you access to the best mortgage interest rates. With a 740 score, the rates are ever so slightly cheaper than with a 620 score; on a $250,000 house with 20% down the difference of $107 per month, this difference has a significant impact. Over the lifetime of the standard 30-year mortgage, this may build to tens of thousands of dollars.
Though virtually everyone wants to avoid the plague, a poor credit score is one of the worst nightmares that everyone wants to avoid; yet, there are certain steps you can assist in improving your credit score.
Should your present score need improvement, there are actions you may do in as short as two to three months before mortgage application: There are fast points you may gain in as short as two to three months before applying for a mortgage if your present score requires improvement:
- Reduce the amount of money revolving in credit card accounts and keep the utilization ratio lower than 30.
- Challenge and correct the inaccurate information on your credit reports
- Login using someone else’s credentials and have the authorization to operate from that account.
- Set all due dates on the bills to be paid on time
- Avoid applying for new credit cards before a mortgage as this will affect your credit score.
It is true to say that the beginning is the best time to work on your credit score as this opens the door for more opportunities. Available credit monitoring services can be used to monitor the progress made.
Down Payment Needed
Besides a good credit score, one also requires adequate cash saved up for use in placing the deposit. Conventional loans are available today where one can pay as little as 3 – 5 % down for a home and a credit-worthy buyer this is possible but to avoid private mortgage insurance one has to put a down payment of 20%. To demonstrate, a $250k home means the minimum cost will be $7,500, while the maximum cost will be $50,000, depending on the percentage of 20% down payment.
Talk to a Lender
Even in the case of application for mortgages, each scenario is unique. As much as it is advisable to research the various types of home loans, it is more strategic to talk to a professional loan officer for him/her to evaluate your circumstance and advise you on what it will take to get you the home loan amount you need. It can also provide you with the necessary guidance regarding the measures that could be taken to improve your credit score and save for a down payment. Do not let this discourage you from applying for pre-approval to ensure that you understand your price range before going out on the search.
So next time you think of owning a $250k home is out of your reach; just know that it is possible if you plan just a little further. It is wise to remain focused on enhancing credit standings as well as saving more to buy.
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