Do you know what the minimum credit score is to qualify for a home mortgage? Currently it?s a mid credit score of 620, but this may change very soon to 640. In fact, some banks have already stopped taking loan applications with a 620 mid score.

What’s a Mid Credit Score?

Managing Your Credit Is Essential to Getting a Mortgage?Minimum Credit Scores for Mortgages Are Rising

When applying for a home loan your mortgage professional will pull your credit scores from three different reporting agencies: Transunion, Equifax, and Experian. (Keep your fingers crossed). The bank that you are applying with will then use the mid score (the one in the middle) from these 3 agencies to then assign a credit risk to you. Not only does your credit score affect whether or not you will get an approval from Fannie Mae or Freddie Mac, but it also affects the interest rate you receive on your home loan. It?s a pretty simple formula: the higher the score, the lower the interest rate.

This is why it is so important to obtain the highest possible mid score as this will save you monthly on your payments and save you thousands in interest over the term of the loan. For example, on a $250,000 loan every .25% shift in the interest rate will yield about a $40 difference in the payment. If your mid score is 740+, you will get the best possible rates available in the market.

Credit Scores Are Very Important

There has been a lot of research done on the performance of home loans and the results are in?the lower the credit score on a home loan, the higher the default rate and the more frequent are late payments. I know these results aren’t probably very shocking to you. The reality is that not everyone is ready or prepared to be a home owner, so this is why it is necessary to consult with a mortgage professional who can help you with all the details: the importance of credit, budgeting, and having sufficient savings in the bank to be ready for this huge step in your life. Being a homeowner is one the biggest steps you will take in your life next to getting married and having children. If you are serious about becoming a home owner, a strong first step is to meet with a mortgage professional to discuss the steps necessary to take this plunge. Good luck!

We would like to thank Andres Reuda for sharing today’s photo via the Creative Common’s License