Don't Let Your Credit Score Get You Down

If you're considering buying a house, getting your finances in order is a top priority. However, you may be worried about your credit score more than you need to.

Make no mistake about it, a decent credit score is critical; however, it doesn't have to be perfect! The following facts should help ease your mind. 

A Perfect Credit Score is Rare
While it's a noble goal to strive for a perfect 850 credit score, it's also important to note that only 1.6% of the U.S. population with a credit score has achieved this feat. According to experts, a score of 760 is typically enough to qualify for the best loan rates. However, even if your score is lower than this, it won't likely prevent you from buying a house. 

The Credit Score You Really Need 
While you may have access to more lenders and get better offers with a higher credit score, don't give up on your dream of buying a house if yours falls in the lower end of the spectrum. In fact, the U.S. Federal Housing Administration (FHA), approves loans for homebuyers with a credit score of just 580 as long as you have a downpayment of at least 3.5% of the total home price.

In some cases, you might even be able to buy a house with a score as low as 500! In general, however, you'll need a score of 680 or better to get the best rates. 

Your Income Plays an Important Role
While a lender might be willing to look beyond a less-than-stellar credit score, consistent income is critical. Note that the key word here is consistent. As long as the lender determines that you earn enough to comfortably make your mortgage payments, you don't need a super-high income. In fact, having a high income is less important than having stable employment. 

With layoffs and furloughs running rampant right now, loss of employment is a factor that's more likely to derail your plans for buying a house. Expect that the lender will verify your employment several times during the period between when you first apply for the loan and your closing day. If you're laid off or fired before you close, this could lead to a denial. 

Facts and Myths About Raising Your Credit Score
If you're interested in raising your credit score before buying a house, you can do some simple things. However, many people fall for myths that not only don't help raise their scores but could also lead to other problems.  For example, shopping around for rates and offers from multiple lenders won't lower your score. What it likely will do, however, is save you a few thousand dollars in fees and interest payments over the life of your loan. 

It's also a great idea to pay off debts before you apply for your loan, but you'll want to choose the right ones. Paying off revolving credit, like credit cards, will have a much greater impact than paying down long-term loans. 

It's also important to note that negative marks on your credit history usually won't prevent you from buying a house. As long as your recent credit history is better and you have a decent score, most lenders won't deny you due to a blip in the past. 

The Truth About Buying a House 
Now that you know the credit score you really need before buying a house, you should be able to breathe easier. Remember to avoid taking out any new credit immediately before you apply and to keep making all of your liability payments on time. While you don't need a perfect credit score, the better shape your finances are in, the easier it will be to achieve your goal of buying a house of your own! 

• Simple Daily Habits to Maintain a Cleaner Home
• Don't Let Winter Win: How to Freeze-Proof Your Garage
• How to Extend the Life of Your Water Heater
• Winterproofing Windows and Doors: A Guide to Keeping the Cold Out
• How to Future-Proof Your Home for Changing Needs
• Home Happiness 101: Small Upgrades That Can Make Every Day Feel Better
• Fall Cleaning Tips For Decluttering Before the Holidays
• How to Create a Cozy Fall Retreat in Your Backyard
• Why Fall is Prime Time for Window Replacement
• Tips for Transitioning Your Closet From Summer to Fall

• Why September Is the Best Month to Paint Your Home's Exterior
• End-of-Summer Pool Closing Tips

• What to Know About Using Gifted Funds for a Down Payment
• What to Know About Using Gifted Funds for a Down Payment
• How to Research Crime and Safety
• What Buyers Need to Know About Home Warranties
• Browsing for Homes Online? Follow These Shopping Tips
• How to Look Past Bad Staging
• What Happens If Interest Rates Change After You Buy?
• How to Compare Two Homes You Love
• Post-Holiday Finances: How to Reset Your Budget for Home Buying
• New Year, New Home: How to Set Smart Home-Buying Goals for the Year Ahead

• Looking Beyond Closets: How to Evaluate a Home's Storage Potential
• Time-Off Tips: Using Your Holiday Break for Real Estate Decision-Making

• What Buyers Notice First in Listing Photos
• How Spring Sellers Can Enter The Market With Confidence
• Tax Considerations Home Sellers Should Know About
• The One-Room-at-a-Time Spring Prep Strategy
• What's the Difference Between Listing a Home and Marketing It?
• How to Respond to Buyer Feedback Without Panicking
• Transparency Builds Trust: Why Honesty Sells Homes Faster
• Winter Selling Myths That Shouldn't Keep You From Listing
• The Value of Local Market Knowledge When Selling Your Home
• Selling in Snowy Conditions: Safety, Access, and Presentation Tips

• Making Your Home Smell Like Home: Winter Scents That Attract Buyers
• Handling Relocation Buyers During the Holidays