What a Good Credit Score Means When Purchasing a Home
September 20, 2021
Thinking about buying a house? You’re not alone. In fact, 2020 welcomed over 2.38 million first-time homebuyers into the world of homeownership.
However, there are many factors that can hinder your ability to buy the home you want, and your credit score is certainly one of them. So, what is a good credit score and what does it mean for homebuyers? Glad you asked.
What Is Considered A Good Credit Score?
Let’s run through this very quickly. Your credit score is a combination of a lot of things. It involves your length of credit, your credit card utilization, number of lines of credit, and most importantly, your payment history. There are other factors that play a minor role like hard inquiries, but these are the important ones.
Your score falls somewhere between 300 and 850. In a nutshell, you want your score to be as high as possible. Will it ever get to 850? Almost definitely not, so don’t worry about that.
Basically, if your score is below 579, it is considered to be a poor credit score. It will be more challenging to find a lender that will opt to do business with you. If your score is between 580 and 669, you may be able to secure a high-interest mortgage or loan, but it will be challenging. 670 to 739 is considered to be a good score range, but it could use improvement. The national credit score average, as of February 2021 and according to Equifax, is 698.
740 to 799 is seen as a very good range. Anything above 800 is considered to be an excellent score and finding a loan will be very easy. Overall, once you pass 700, you have a pretty decent credit score and good chances of securing a loan.
How A Good Score Will Help You Buy A Home
Having a credit score in a healthy range or better will help you with buying your home and it will have positive financial effects for the entire time you have your mortgage. Not only that, it will even maximize your profit if you choose to sell or rent it out!
Help With Buying
Having a good credit score will help you secure a loan, which also means you will have an easier time getting pre-approved for a loan. Being pre-approved gives you leverage over other buyers and makes the steps to purchasing a home much easier. Luckily our agents can help you get preapproved with our preferred lender! Just set up an appointment with the agent in your community of interest and they will assist you with this step.
Having the ability to make an offer as soon as possible within your maximum loan offer range puts you in the best position, especially when you can show that you are able to pay almost immediately.
It will also give you benefits when it comes to shopping around for a loan. More lenders will be willing to approve you, giving you the ability to find the best offers from various lenders. For example, if you choose our preferred lender, Patriot Mortgage, the homebuying process will seem seamless since there is direct communication between the skilled Loan Officers and our knowledgeable team of agents.
The obvious long-term benefit of buying a home with a good credit score is that you will ultimately be paying less for your loan than you would with a lower score.
A lower interest rate may not seem like a big deal at first glance. After all, you are paying it off over 30 years or so. However, the difference between 3% and 6% on a $300,000 house is still $9,000. Would you want to pay an extra $9,000 on a car? Avoiding this and preparing your finances are the keys to a successful real estate purchase.
Boost Your Score
If the housing market isn’t for you right now, it’s not a bad idea to wait it out and boost your score before buying. Having a good credit score ultimately saves you money and gives you more freedom when purchasing a home.
Sometimes starting can be the hardest part, but don’t worry, we are here to help! Contact any of our highly accomplished agents for more information today. With over 70 years of experience, we are El Paso’s most trusted homebuilder.