Boston condos for sale: What credit score do you need to buy a condo?
According to data from the most recent Origination Insight Report by Ellie Mae, the average FICO® score on closed loans reached 753 in February. As lending standards have tightened recently, many are concerned over whether or not their credit score is strong enough to qualify for a mortgage. While stricter lending standards could be a challenge for some, many buyers may be surprised by the options that are still available for borrowers with lower credit scores.
The fact that the average Boston condo buyer has seen their credit score go up in recent years is a great sign of financial health. As someone’s score rises, they’re building toward a stronger financial future. As more Boston downtown condo buyers with strong credit enter the housing market, we see a natural increase in the FICO® score distribution of closed loans, as shown in the graph below:If your credit score is below 750, it’s easy to see this data and fear that you may not be able to qualify for a mortgage. However, that’s not always the case. While the majority of borrowers right now do have a score above 750, there’s more to qualifying for a mortgage than just the credit score, and there are still options that allow people with lower credit scores to buy their dream home. Here’s what Experian, a global leader in consumer and business credit reporting, says:
- Federal Housing Administration (FHA) loans: “With a 3.5% down payment, homebuyers may be able to get an FHA loan with a 580 credit score or higher. If you can manage a 10% down payment, though, that minimum goes as low as 500.”
- Conventional loans: “The most popular loan type typically comes with a 620 minimum credit score.”
- S. Department of Agriculture (USDA) loans: “In general, lenders require a minimum credit score of 640 for a USDA loan, though some may go as low as 580.”
- S. Department of Veterans Affairs (VA) loans: “VA loans don’t technically have a minimum credit score, but lenders will typically require between 580 and 620.”
There’s no doubt a higher credit score will give you more options and better terms when applying for a mortgage, especially when lending is tight like it is right now. When planning to buy a home, speaking to an expert about steps you can take to improve your credit score is essential so you’re in the best position possible. However, don’t rule yourself out if your score is less than perfect – today’s market is still full of opportunity.
When you first start looking into financing a Boston condo for sale, you’ll quickly learn your credit score makes a huge difference. This three-digit number is essentially a calculation of how likely you are to repay a loan. Even if you’ve never checked your score before, it still exists and can either help or harm you when purchasing property. Whether you’re looking at Boston Beacon Hill homes or Boston downtown high-rise condo, read on to discover how your credit score could affect your ability to buy a home.
This is considered a bad credit score. You may not even qualify for standard FHA loans, which are often the recommended loan type for people with poor credit. Those who can get an FHA loan need to have a score of at least 500, and they’ll have to pay a down payment of 10 percent. A higher down payment is required because it’s a bigger risk for lenders.
Once you get into this category, your credit score still isn’t ideal, but you’re not in such a bad position. You can qualify for an FHA loan with only a 3.5 percent down payment once your score hits 580, and if your score is at least 620, you can even get normal housing loans backed by Fannie Mae and Freddie Mac. In general, anyone with a credit score of at least 600 will be able to find some reasonable mortgage options.
Most Boston Midtown condo buyers tend to fall in the upper 600s. You might find your interest rates are a little higher, costing about .5 percent on average more than the company’s lowest interest rate offerings. However, most lenders will still be willing to work with you, and it shouldn’t be particularly challenging to get a home. You may find you can get more favorable rates by being willing to pay a higher down payment.
All loaning institutions see people with credit scores of 700 or higher as having good scores, which puts them in a far better position when shopping for loans. Since lenders see you as being decently reliable and likely to pay off your loan on time, you’ll have access to lower down payment options and lower interest rates.
If your credit score is in this range, you’re one of the rare people with excellent credit. Lenders love working with those who have excellent credit because they feel like it’s a wise investment. You can expect to get interest rates as much as two percent lower than people with poor credit. Those with excellent credit are also far less likely to have to pay hefty fees or high mortgage insurance rates when settling on a loan.
Boston Real Estate and the Bottom Line
Don’t let assumptions about whether your credit score is strong enough put a premature end to your homeownership goals. Let’s connect today to discuss the options that are best for you.
If you’re interested in purchasing downtown Boston real estate is an area that always has a variety of Boston condos for sale available, and if you aren’t happy with the initial interest rate on your home loan, you can take advantage of the opportunity to refinance later. The experienced agents at Ford Realty can help you start your search for the perfect property. Call us at 617-595-3712.