What Credit Score Do I Need To Buy My First Knoxville Home?
Many buyers often wonder, “What credit score do I need to buy my first Knoxville home?”
Unfortunately, there is no real straight answer to this question.
It really just depends, on the lender and loan type.
In this post, we’ll take a closer look at what credit scores and what they mean when you’re applying for a mortgage to buy your first Knoxville home for sale.
Credit Scores: More Than Just A Number
So, which credit score are they looking at?
When your lender is looking at your credit score, they’re looking at the score compiled by the Fair Isaac Credit Corporation (FICO). Your FICO score is computed by looking at your credit from the three major credit monitoring agencies: Equifax, Experian, and Transunion.
Your FICO Score is made of the following factors:
- Payment history – 35%
- Amount owed – 30%
- Length of credit history – 15%
- Types of credit – 10%
- New credit – 10%
What’s A Good Credit Score?
Credit scores can range from 300 to 850. Within that range, there are different categories of credit ratings:
- Excellent Credit – 750+
- Good Credit – 700-750
- Fair Credit – 650 – 699
- Poor Credit – 600-649
- Bad Credit – Below 600
Each of the three credit bureaus will report a different FICO score, which means your lender will have three different scores to look at. If you lender is able to find three different scores on you, they will take the middle score. If you lender finds only two scores, they’ll take the lowest score.
So, What Score Do I Need?
Credit score requirements vary by lender and by loan type. But, there are some general standards for what the minimum requirements are to get approved for a loan:
- FHA loans generally require at 580 or higher
- Conventional loans generally require a 620 or higher
- VA loans don’t have a minimum score, so it depends on the lender
- Rural Development loans generally require a 620 or higher
While these figures are the general guidelines, they aren’t true for all lenders. Some may have tighter guidelines, while others will have looser guidelines.
The better the credit score the better rate you’ll get when you apply for a loan. When you get a lower rate, you’ll save yourself more money. The type of rate you’ll get based on your credit will depend on your mortgage company and loan type, so feel free to check around.
What If I Don’t Have A High Enough Score?
With a little bit of work, it can be possible to improve your score in a matter of months.
Here are a few ways to improve your credit score:
- Improve Payment History – Make all of your payments on time.
- Improve Amount Owed – Pay down your debt and avoid additional debt.
- Improve Length of Credit History – Be patient, allow your credit to build over time.
- Types of Credit – Diversify your types of credit if possible. It’s good to have revolving credit (credit that varies) and installment loans (car payment or mortgage) to show that you can use both responsibly.
- New Credit – If you already have established credit, avoid taking out additional forms of credit that can ding your score.
If you don’t have a high enough score to buy a home, talk with your loan officer about what things are hurting your credit. With a little bit of work and patience, you can improve your credit in a matter of months, depending how low your score is.
Bad credit doesn’t make it impossible for you to buy a home. It just means you may have to do a bit of work prior to being able to.
Are you thinking about buying a Knoxville home this year? Please let us know if there is anyway that Knoxville Home Team can assist you. Rick can be reached at 865-696-9002 or via email at Rick@KnoxvilleHomeTeam.Com. Kati can be reached at Kati@KnoxvilleHomeTeam.Com.
You can start your home search today on our Knoxville Home Search Page.