Credit Score Needed to Buy a House in the 2009 Market

Reader Question: "How high should my credit score be to buy a house in this market?"

This is a fairly common question that we receive. In fact, it's such a frequently asked question that I decided to publish a new video on the subject. In the video below, I'll give you an overview of the FICO credit scale, and what's considered a good credit score in today's economy:



This is also the kind of question where you'll get a dozen different answers from a dozen different "experts." There are actually two parts to this question, whether you intended it or not:

• Part 1 - What kind of credit score do I need to qualify for a mortgage loan in 2009?
• Part 2 - What score do I need to get the best interest rates on a loan?

Back in October, somebody asked if 700 was a good score in this economy. So that blog post might be worth a read. But things have changed since then. So let's take a more recent sampling of what the experts are saying on this subject. The most recent quotes are listed at the top:

What the Experts Are Saying

"To qualify for a loan, first time home buyers need a credit score of at least 660 unless they try for an FHA loan."
(Source: ThinkGllink.com, January 2009)

"About two years ago, you could have had a score of about 620 or so to get a lender's best rate on something. Now, lenders are really looking at a rate of 760 at the least, said Kelli Grant with SmartMoney.com."
(Source: komonews.com, January 2009)

"The top notch credit score needed for the best rate in today's world is 740, Wickert said. It's possible for borrowers with weaker scores to get the good rates, but they pay a risk premium that can be financed into the new loan. For instance, Wickert said, someone with a credit score between 680 and 699 could get the same rate as the person with a 740 score by paying 1.3% of the loan balance up front."
(Source: JSonline.com, December 2008)

"Borrowers need a credit score of at least 750 to get the best deals. Keeping credit-card balances below 35 percent of their credit line is very important, but 20 percent is the maximum allowed for a top score."
(Source: RealtyTimes.com, November 2008)

"In the latest example, Mortgage Guaranty Insurance recently boosted the minimum credit score needed for someone to buy a house in a restricted market. In August, the minimum score was 680. As of October, the minimum score is 700."
(Source: MoneyCentral.MSN.com, October 2008)

"To qualify for the best interest rates on a mortgage loan, you'll need a credit score of at least 760; a score below 620 places you in subprime territory."
(Source: Kiplinger.com, October 2008)

* These quotes refer to the FICO score in particular, which is the one used by most lenders.

What to take away from all this:

• Opinions vary on how high your score needs to be in order to get a home loan in this market.
• There's a big difference between qualifying for a mortgage and getting the best interest rate on that mortgage. In order to get the best rate, you need an even higher score than you would need just to qualify for the loan.
• Your credit score is just one of the things a lender will look at when considering your for a home loan. They'll also consider your debt-to-income ratio, the size of the loan in relation to your income, and other financial factors.
• If you feel you have a decent score, and you want to know if you can get a loan, there's only one way to find out for sure. You have to apply and see what happens. You don't have anything to lose by applying for a mortgage loan (except a bit of time and energy).

Hope that helps you out. If you'd like more information on this subject, check out the library of credit score articles below:
http://www.cornettcommunications.com/credit-score.php