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A credit score is a huge factor when buying a home. It determines if the home buyer qualifies for a loan and what loan they may qualify for. It also affects the rate, loan amount, and down payment, they will be asked to pay. Post the ongoing COVID-19 pandemic, many mortgage lenders are asking for higher scores and bigger down payments. If you are planning on buying a house soon or even in a few years, look at your score now. Starting to look into ways to improve your credit will pay off in the long run. 

Loan Types 

Photo of loan bag with gold coins Conventional: Loans that a backed by individual private mortgage lenders instead of the federal government. Loans that are backed by Fannie mar and Freddie Mac require a minimum of 620, but lenders have free discretion to require a higher score. 

Compared to government-backed loans conventional loans generally have stricter requirements such as credit score, income ratio, and employment history. 

FHA: The minimum is 500 with 90% financing but a 10% down payment will need to be put down. To qualify for maximum financing, your credit score would need to be above 580 with a 3.5% down payment. 

VA: Loans that are only available for qualified veterans, service members, and certain surviving spouses of veterans. These loans do not have a minimum credit score that is required to qualify. However, the VA does require lenders to do a comprehensive review of the entire profile. 

USDA: Loans that are offered to low and moderate-income borrowers buying a home in a rural and suburban area. These loans do not require a minimum credit score. Applicants do need to be able to demonstrate the willingness and ability to handle and manage debt and may want a 640 or higher. 

Interest Rates 

Not only does a credit score determine what loans you qualify for but it also influences the interest rate on your mortgage. 

Photo of a credit score meter

Factors That Go Into a Credit Score 

There are many factors that lenders are looking for when reviewing a credit report. These factors include payment history, balances owed, age of accounts, credit mix, and recent activity. Lenders want to see that you have a history of making payments on time and in full and the amount of time your accounts have been active. They also consider your balances vs available credit, you want to try to keep this below 30% for the best score.