As your family has grown and changed, you might be looking to move out of Manhattan into one of the burrows, such as Staten Island. It might also be the time to purchase a home, one that is more affordable and with more square footage than a traditional city address. If you are ready to start looking for a home, likely you have been looking at your finances to better understand how much you can afford.
Another part of that preparation is looking at the qualifications for a mortgage and understanding what type of mortgage terms available to you. If you have looked at your credit score and seen that it is less than perfect, you might be wondering what score you need to qualify for a mortgage. Here is what you need to know about FICO scores and how they impact your qualifications for a home mortgage.
What is Your FICO Score?
A FICO score is a three-digit number that is based on information found in your credit report. It is essentially a summary of your credit report, allow lenders to quickly make decisions about whether to extend you credit or not. Since a FICO is calculated by your credit information, then you have the ability to shape that score by paying your bills on time, choosing not to take on excessive amounts of debt, and overall making smart credit choices.
Different Home Mortgage Options Available
There are a variety of mortgage options, which mean that your credit score can be less than perfect, but that will still allow you to borrow for a home. FHA (Federal Housing Administration), VA (Veterans Affairs), USDA (United States Department of Agriculture) are all government backed guarantees for the bank. Lenders feel comfortable giving a loan to you because the government helps to mitigate the risk.
The FHA loan credit score requirements are clear-cut, with a minimum score of either 580 or 500 depending on the size of your down payment. The VA and USDA do not have a firm credit score, but most lenders look for a score of at least 620.
Conventional mortgages, on the other hand, may require higher than 620, simply because they do have any governmental guarantees.
Combining Your Credit Score With Other Factors
Your credit score can be mitigated if you have a bigger down payment. For instance, you may qualify for an FHA loan with a 500-credit score, but you would need a 10% down payment, instead of the traditional 3.5% down payment the program requires.
Lenders usually don’t just pull your FICO score from one credit bureau, but they pull it from all three, Equifax, Experian, and TransUnion. The factors that contribute to your credit score include payment history, credit utilization, credit age, credit mix, and the number of new inquires for credit that are on your report.
If you have concerns about your credit score, it is important to pull your free report ahead of time and make sure all the information is accurate. Removing inaccurate information can help to bring up your score. Once you have your credit score in the range that will allow you to qualify for a mortgage, then it is time to start looking for a home. Our team can help you to navigate the Staten Island real estate market, so contact us today.
Wonica Realtors & Appraisers are Staten Island’s #1 independent full-service real estate firm, serving the needs of the community for over 30 years. Whether you’re buying, selling, renting or relocating, our staff of highly trained professionals will provide quality realty services with personal attention to your individual real estate needs.