Credit Scores and Mortgages: What Score do You Need to Be Approved?
You know that your credit score affects your interest rate, but did you know that it can affect how much of a loan you’re approved for? Those with better credit can have a lower income and get a higher approved loan amount, compared to someone with a high income and poor credit. But many homeowners, or wannabe homeowners, wonder: what score do we really need? Read on to find out.
What’s a credit score good enough to get a mortgage
Unfortunately it’s not as simple as offering a single credit score as the number you must achieve to get approved. The reality is that your credit score is one of the most important factors lenders will consider when reviewing your application, but it’s not the only qualification. They’ll also look at your income, the length of time at your job, your other expenses, and a few other factors.
That said, most people with a score higher than 660 will qualify for a mortgage. This assumes that the person applying can afford the payments, but if a person applies for a loan that fits within their income, and their score is 660 or higher, then they’re more than likely to be approved.
If your score is below 660 you won’t automatically be denied a mortgage. However, the situation will be more complicated. Have you heard the term subprime mortgage? It describes mortgages made to borrowers who have credit scores below 660, though some say the term only applies to borrowers with scores lower than 620 – or even as low as 600.
In subprime situations, lenders more heavily rely on other factors. They may include income, solid assets, and other factors that allow them to comfortably override low credit scores. That said, when experts were asked what the absolute lowest score a person could have and still get a mortgage, they said as low as 500.
While it’s incredibly rare for someone with a score that low to get a mortgage, it can happen. However, keep in mind that anyone with a score that low is going to be big bucks in extra interest over the course of their loan. The better option is to see what you can do to raise your score. Many of the clients of Leaf Credit Solutions are shocked to learn just how quickly their scores can rise.