What Credit Score Do I Need to Get a Mortgage?

16 Apr 2019

If you are someone who is curious about the mortgage procedures involved or a free mortgage advisor in UK when it comes to buying a new house or remortgaging an ongoing deal, then it is vital that you should know that a credit score is key to getting a good deal on a mortgage plan. So much so that it can be the ultimate dealbreaker in getting a mortgage approved at an unbiased mortgage rate.

This may lead one to wonder, what is the big hoodlum regarding credit scores? Why do we need credit scores for a mortgage?

Credit scores are used by mortgage dealers and banks alike to determine creditworthiness, evaluate credit values, weigh out risk potentials topped with important factors such as income, owned assets, owned property and monthly/annual payment that are also considered.

How Do Mortgage Credit Scores Differ from Other Financial Scores?

Like every other finance company out there, even regular mortgage lenders prefer to use FICO scores employing a version each taken from the three prominent credit bureaus to put together a tri-merge credit report along with a mid-score that will verify the mortgage rates.

Every person working in the finance industry is aware that FICO scores are industry-reliable and because of this very reason one slight change in the sector of mortgage companies could end up shaking the very core of the financial industry and the way it works.

The Credit Scores Most Mortgage Lenders Tend to Employ

Credit bureau Equifax Experian TransUnion
FICO score version FICO Score 5 FICO Score 2 FICO Score 4
Also known as Equifax Beacon 5.0 Experian/Fair Isaac Risk Model v2 TransUnion FICO Risk Score 04 (Classic 04)

Understanding Credit Scores Before Applying for Any Mortgage

  • Figure out how many credits you own.
  • Examine all 3 of the credit scores owned by you.
  • Complete all procedures well ahead in advance (3-6 months) before you plan to applying for a mortgage loan.
  • Mend all challenges that arise.

Using a Tri-Merge Credit Report the Way Mortgage Lenders Do It

Mortgage lenders take out all three credit scores by utilizing the middle score to serve qualification intents unlike those of credit card issuers and auto loan lenders so it is absolutely necessary that all three credit scores stay the way they are to gain a solid pricing.

Bureaus such as Equifax, Experian and TransUnion contrive credit scores so that mortgage lenders will give the go-ahead for a tri-merge credit report that provides an insight to all 3 credit scores.

Low Credit Score Gets You a Higher Mortgage Rate

It is stated that a low credit score will get the dealer a conveniently-high mortgage rate and vice versa. However, a high credit score will provide higher qualifications for a mortgage.

Minimum Credit Scores For FHA

  • FHA values tend to fall in value and reach 500 FICO
  • If the FHA score is less than 500 FICO then the user will require the down payment of almost 10%.
  • For people who score 580 FICO or more than that then the buyer may qualify as low as 3.5% down payment.
  • Mend all challenges that arise.

If you go to search for a mortgage deal from a reliable source using the mortgage broker near me option then there are possibilities you may get a minimum credit of 500 score points. However, most banks do not offer a low credit score so as to avoid many underlying risks of FHA financing. Getting an actual credit score of 500 validated to be honest, seems like a tough call.

Finally, the end verdict is that when it comes to credit scores – Aim high and try to win a score of at least 650points and above as your credit scores are the topmost important factor that will get you the best mortgage rate on the market. Keep your overall credit report portfolio powerful as well and you will be on your way to scoring a premium mortgage deal!