Mortgage is a huge step in financial planning and the commitment to pay $300,000 over the years is not to be taken lightly. Among the many criteria that lenders will consider when approving your loan, credit score is a crucial aspect, as you prepare for this commitment. Knowing which credit score range offers the most favorable chances at qualification can help you decide whether or not it is possible to get a mortgage of this size.
Why Credit Score Is Important
When you apply for a mortgage, credit report & score are used to determine how you have repaid your debts in the past. This gives them an indication of the likelihood of your ability to afford new mortgage payments. Overall, the closer to 850, the better are the mortgage terms regarding interest rates and chances for approval.
For a $300K Mortgage
Since the amount being financed is large, most of the lenders will offer this amount to people with good to excellent credit. Here is an overview of typical credit score requirements:Here is an overview of typical credit score requirements:
• 720+ Credit Score – You are considered very creditworthy when you fall in this category and thus you will be given the best rates and benefits. Therefore, most borrowers planning to secure a $300K mortgage should ideally shoot for a credit score of at least 720.
• 680-719 Credit Score – This is also a good range to get approved for loans but one will not be eligible for as low a rate as s/he would be if s/he had a score of 720+.
• 470-579 Credit Score – The scores in this category make it hard to get approved for credit. You may have to search for a while or have a higher credit score in order to find a lender who will lend you $300k.
• Below 640 Credit Score – In this range, it is going to be very tough to qualify for this much mortgage money. People within this bracket often require a co-signer with a better credit rating or wait for them to improve on the credit score before the lender considers such a large amount for loan.
As you can see, it is wise to target a minimum of 680 and preferably higher than 720 while applying for a mortgage of $300,000. The higher, the better for extending the line of buying and other credit.
Ways to Boost Credit Ratings
If your current credit score is lower than the aforementioned thresholds, improve it before applying. A few strategies include:
? Ensure all outstanding bills are paid on time since delays lower credit scores significantly.
? Maintain low balances –it is important to reduce balances as high balances affect scores.
? Avoid hard inquiries – Using credit is not bad, but credit checks are and they can reduce your number.
? Correct errors – Challenge any errors that pull down your scores.
A debt consultant can also give you an Individualized credit plan that can be useful in enhancing your credit. It requires hard work and some time but seeing your scores rise gradually it will open up more mortgage and lending opportunities.
The Takeaway
Understanding the usual credit score requirements is helpful when establishing objectives and expectations when looking for a $300K loan. Typically, minimum approved scores are at 680, but it is advised to shoot for 720 or above to get the best interest rates and lending options. As with most things, it is easier to build good credit when you are young and this prepares the way for mortgage readiness when a good house is found.
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