According to Investopedia, “A credit score is a statistical number that evaluates a consumer’s creditworthiness and is based on credit history. Lenders use credit scores to evaluate the probability that an individual will repay his or her debts. A person’s credit score ranges from 300 to 850, and the higher the score, the more financially trustworthy a person is considered to be. The credit score model was created by the Fair Isaac Corporation, also known as FICO, and it is used by financial institutions. While there are other credit-scoring systems, the FICO score is by far the most commonly used.”
Investopedia further states that “A credit score plays a key role in a lender’s decision to offer credit. People with credit scores below 640, for example, are generally considered to be subprime borrowers. Lending institutions often charge interest on subprime mortgages at a rate higher than a conventional mortgage in order to compensate themselves for carrying more risk. They may also require a shorter repayment term or a co-signer for borrowers with a low credit score. Conversely, a credit score of 700 or above is generally considered good and may result in a borrower receiving a lower interest rate, which results in them paying less money in interest over the life of the loan.”
FHA Loan Requirements
With nearly 1 in 5 U.S. buyers using a FHA loan to finance a home purchase, here is how credit effects FHA loans. Applicants are now required to have a minimum FICO score of 580 to qualify for the low down payment advantage, which is currently at around 3.5 percent. If your credit score is below 580, however, you aren’t necessarily excluded from FHA loan eligibility. Applicants with lower credit scores will have to put down a 10 percent down payment if they want to qualify for a loan.
Thus, It is important to understand that a better credit score can really pay off not only the payment for a new home, but also in the amount of interest paid over the life of the loan. You got to ask yourself “Why would I want to pay more for the same home because I did not manage my credit score,”
In the Real Estate Market?
You should consider using a realtor. I could save you money especially with new home builders and it does not cost you anything. So why not? Let me save you money!!! If you are interested in buying real estate (new home, existing home, or commercial property), please contact me (Alan Lane with Signature Realty Associates at 2234 Lithia Center Lane, Valrico, Florida).
As a life long resident of Central Florida, I can help you find the right property for you whether it is in Orlando or as far south as Sarasota. My email address is firstname.lastname@example.org, or call me at 813.205.9280. If you are just starting your search, you can search the MLS for real estate opportunities on my website at this link.