A credit score is a number that summarizes a person’s credit borrowing history, the credit worthiness of that person and the amount of risk a lender is taking by offering credit to that person. Because there is currently no legal mandate stipulating an acceptable credit score needed to buy a house (there are, however, legislation limiting discrimination or predatory lending practices based on race, sex, age, etc), a lender can, typically, offer more credit to a prospective buyer, regardless of the credit score needed to buy a house. However, when a buyer has a below average credit score, this often leads to rejection of credit offers, higher interest rates and/or less favorable terms offered than a buyer with a better credit score. Below I’ll describe why a credit average credit score to buy a house score is not necessarily needed to get a loan.
Why a Credit Score is Not Needed to Buy a House: To purchase a house, usually means that you have a significant income, a decent credit score and a cosigner who can cosign. You must qualify for at least a traditional home loan, so a mortgage broker will probably be able to advise you how much you should borrow, and whether or not your credit score is high enough to qualify for prime mortgage rates. The credit score is typically a raw number that represents your credit history, so many mortgage companies consider it a “floor,” rather than a “check.” So while a credit score is definitely needed for most home loans, mortgage companies are permitted to consider it as a “tie-breaker” for certain high-risk subprime mortgage loans.
Why a Credit Report May Not Need to Be Submitted to Mortgage Lenders: There are hundreds of credit bureaus out there, and they all provide credit reports to the general public. Usually, any lender that specializes in mortgage financing will require a credit report from any of the credit bureaus. This is because credit bureaus routinely provide information to the major lending institutions that they do business with on behalf of their clients. In fact, credit bureaus play an important role in helping to qualify mortgage applicants, by providing financial information that helps lenders make loans that are suitable for their customers’ credit profiles.
The only problem is that many people have good credit, while others have poor credit. The credit scoring models used by lenders consider these subprime borrowers as a higher risk than their average buyer, which leads to higher interest rates and fees for the lenders. This is why many mortgage brokers encourage people with low credit scores to use one of the alternative credit programs that are available to them. These alternative credit programs often do not require a credit check at all, and you don’t even need a cosigner.
If you are looking to buy a new house, you should first try to get a copy of your credit report. This is so that you can find out what your credit score is. If your credit score is low, then it may be difficult for you to get a good mortgage rate or a good deal on a new house. However, there are some very attractive houses available for those with low credit scores. In fact, if you have a low credit score, you may still be able to afford a nice house, if you are willing to pay a little bit more than you would for a house that fits your credit profile.
In order to qualify for a mortgage application, you need to have at least a decent credit score. Do you know how to improve your credit score? Have you considered applying for a mortgage credit card? These are good ways of improving your credit score before you apply for a mortgage loan. If you want to take another look at your credit score, go online and request a free credit score from one of the three major credit-reporting companies.