When you are going through the mortgage application process while searching for a home in Locust Grove, the topic of your credit score will most likely be discussed.  Questions like when will your credit be pulled, do you have any outstanding bills, why is this charge on your credit history are all going to be asked by your lender.  Your credit score is important to lenders because it shows the history of how you managed debt.  For a mortgage company to make an investment in you, they want to be sure that you are qualified to pay back the loan.  Here are some important things to know about your credit score.

How is my credit score decided?

There are three bureaus, Equifax, TransUnion, and Experian, that provide your FICO credit score to lenders. There are lots of factors that go into determining the number, but the most impactful ones are:

  • kind of credit you use
  • your new credit accounts
  • how you use your credit
  • timeliness of your payments
  • the length of your credit history

How is my credit score used when applying for a mortgage?

Most mortgage programs have a qualifying credit score minimum that you must meet in order to obtain a loan.  If you apply for a mortgage on your own for a home in Locust Grove or elsewhere, then the median score (found by calculating the median from the three bureaus) is used as your qualifying credit score.  If you are applying with another person, then most of the time the lender will use the lowest median score of you and the co-applicant to determine your qualifying credit score.  When you are searching for a home in Locust Grove, your lender may only want to request one credit score report once you’ve found the home you want because getting a report can affect your score.

How does my credit score impact my interest rate?

The higher your credit score is, the lower your interest rate will be.  You can talk with your lender about ways to increase your credit score.  They can give you suggestions as to what bill to pay off first that can help to improve your number.

Are there credit score requirements for loans?

Different loan programs have different score minimums in order to qualify for a loan.  These numbers can change so it is always best to talk with your lender about all the programs you qualify for before you make a decision.  When you are searching for a home in Locust Grove, the types of loan programs available in the area can be different by lender too.

Credit score requirements are:

  • Conventional Loan: score of 620 or higher
  • FHA: score of 580 or higher
  • USDA: score of 640
  • VA: The minimum score varies by lender.

I think my credit score is low.  What should I do?

If you are concerned that your credit score could impact your ability to buy a home in Locust Grove, or anywhere, then talk to a lender.  The lender can give you suggestions for ways to improve the score.  The lender may also be able to give you a general timeline for how long the changes you make will take to improve your score.

Whenever you are ready to start your search for a home in Locust Grove or the surrounding area, I am here for you. I can share recommendations for lenders with you too!