There’s a common misconception that in order to buy a home, you have to put 20 percent as down payment and have an excellent credit history to boot.
Actually, nothing can be further from the truth. This is because what is bad credit to a consumer might be good for a mortgage company.
In terms of numbers, just a credit score of 620 might be good enough while score that is above this cutoff figure should be more than enough.
Usually, there are two main factors that are determined by mortgage companies from your score. First, your credit score will determine whether it is a conventional or FHA-type program. Second, the interest rate among other charges and which is inversely proportional to your credit score.
Apart from this, there are a number of questions that are asked, based on your credit score, and which is actually what determines what your score is. A couple of these include: Is there a pattern of previous credit delinquencies? Are there balances still in existence with your closed-out accounts?
If the answer to these questions is a ‘Yes’ with a 620 score, one might find it difficult to a get mortgage as opposed to one who has the same score but one that answers the questions with a ‘No’.
Yet without a doubt, your credit score will clearly play an important role in determining the type of home loan that you are eligible for. Also, the overall credit overview is taken into consideration to ascertain what questions will arise during the underwriting process.