How Much Credit Score Is Needed to Purchase a $200 000 House?
One of the largest decisions individuals make in their life is owning a house, hence it is crucial to consider the financial consequences of the choice. One must acquire a mortgage to purchase a $200,000 property; hence, your credit score is one of the most important factors the lenders will take into account to determine if you qualify for a mortgage and what additional conditions you could be qualified for. Having stated this, whatever credit score is needed to buy a property for $200,000?
Financial counselors and conventional lenders usually agree that one must, at least, have a credit score of 620 to be eligible for a traditional loan. Still, for any subfolder, a higher score increases the likelihood of obtaining a better mortgage rate and terms.
Here is an overview of recommended credit scores for a $200,000 mortgage:
- 620 credit score: Standard amount required for most regular financing categories. You can be eligible in this level but can be charged a higher interest rate plus other fees.
- 640 credit score: It is accepted as “average” based on the lending criteria. While most credit-worthy individuals will be allowed access to credit and reasonable interest rates will be offered, the rates will still remain relatively high.
- 680+ credit score: Regarded as good credit status within a stipulated period of time. Will be able to get the best mortgage rates and better contractual terms from most of the lending institutions; therebycutting significantly on the interest costs throughout the term of the mortgage.
- 740+ credit score: Will provide you with the opportunity to get a qualification for the most favorable loan rates. Has the highest credit score and offers the best loan terms as well as the lowest interest rates for a $200k home loan.
When getting a large $200,000 mortgage, there is a positive correlation between the credit score obtained and the result. However, the basic scores as low as 620 may get you through and you will drastically save more in the entire 30-year term of the home loan if you at least have a score of 680 or higher when applying. This earns you lower rates of interest to afford monthly payments on the borrowed sum.
Other factors that are used by the mortgage lenders while approving a loan include the credit score, the percentage of debt that one has as compared to income, the down payment, employment history and the documentation of income. But, having a higher credit score will also guarantee you to get high chances of a quick approval and the best financially sustainable interest rates for purchasing your $200,000 home.
Some things that any potential borrower can do to help increase his / her credit score before applying for a mortgage are: paying all outstanding bills on time, maintaining reasonable levels of outstanding credit, not applying for any new forms of credit within 6 months of applying, and checking the credit report for errors. Here are the steps to build your score now before you start the home buying process. This will make you have more home and loan choices and at the same time reduce hugely on your total interest cost when funding your new home.
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