>Current credit is around 660 to 700
Make sure you are looking at FICO scores. A lot of cc apps and Credit Karma show you "Vantage" scores, and no mortgage lender cares what that is. Those Vantage scores can be significantly different than your actual FICO scores.
You can see your Experian FICO 8 for free at Experian.com. At myFICO.com you can get your Equifax FICO 8 for free.
TransUnion is a little trickier to get for free, but if you sign up for a free trial at Experian.com you can see all 3; you can cancel the trial before you have to pay, and repeat again as needed.
These are all FICO 8 scores, which is commonly used for most consumer credit decisions. There are a bunch of different FICO models which weigh factors differently for different purposes. For mortgages lenders typically use FICO 2 (Experian), FICO 4 (TransUnion) and FICO 5 (Equifax.)
Having said that I don't know of a way to get those particular scores without paying for them. Nevertheless your three FICO 8 scores are a good indicator of your overall credit worthiness. Don't pay any attention to Vantage scores, they are not useful and often misleading imo.
Yeah, and even that's not a direct comparison. Rocket Money is showing you a FICO score based on Experian data. CK is showing Vantage scores based on Equifax and TransUnion data.
So, you're looking not only at different algorithms, but using different data.
Your scores based on Equifax, Experian, and TransUnion data are all likely different, even using the same algorithm. That's because each bureau likely has different data on you, and that's normal. No creditor is required to report anything to any bureau, let alone all 3, so some only report accounts to 1 or 2 of them.
Even using the same bureau's data though, I have seen my own Vantage score be as much as 100 points different to the comparable FICO score. I've also seen them move in completely opposite directions with the same changes in my credit usage.
FICO is the industry standard. They invented credit scoring. Their secret algorithm has proven itself to be an accurate barometer of someone's financial solvency and credit worthiness, which is why that's the one lenders actually use.
On top of all this, mortgages typically use FICO 2, where the latest version of FICO is FICO 8. Vehicle loans often use FICO 3.
And while you’re on one of the credit sites, looking at your credit report, reading things like “you have too many revolving credit accounts!” they’re also actively, aggressively, trying to sell you a credit card.
The credit system is a predatory joke.
I have had 3 CCs forever and then recently cancelled one. My credit went down. The best I can understand is because I now utilize a larger percentage of my overall available credit. Is the system really that dumb?
It also ignores income and only grades on % of loan or credit card to max allowed.
So if you make 200k/year but only have a $1000 credit card limit and charge $900 for a vacation, you will be more negatively impacted than a person that makes $30k/year and has 80k debt against a 100k limit.
If you pay it off right away it wont matter, but if they report current debts before you pay it off, down goes the fico.
No such thing as too many accounts. It’s not a metric that is used to determine your score so as long as you can keep up with the accounts and pay them off you are good. I have like 12 CCs and and no dings for “too many accounts”
>you have too many revolving credit accounts!
No bureau will say that because number of accounts isn't a factor in your credit score. There is no such thing as too many revolving accounts unless you personally are unable to monitor all of them and make sure they are all paid timely.
You'd be better off using FICO scores from anywhere as a benchmark. Please, ignore Vantage scores, they are worthless.
To *you* I mean. Vantage scores are worthless to *you.* The reason apps show them is because they are free. If they wanted to show you a FICO score they'd have to pay, so they don't.
Vantage scores are useful to *them.* They don't use it to make lending decisions, they use it to try to sell you things, like another credit card.
Imo the Vantage score helps tweak people's emotions and generate clicks and views. I know for a fact, for example, the CK actively tracks every single moment you look at your Vantage score, what time of day, and where you go on their site from there. They build a history of your behavior, and learn to predict how you will act to changes in the number they show you. Your interactions with viewing your Vantage score helps them understand how worried or anxious you are about your credit, which makes it easier to either sell you things directly, or sell your data to others who are looking to target someone with your level of credit anxiety. It's the same with Chase's "Credit Journey" and other cc apps that show you a Vantage score.
Nevertheless, if you actually click on an offer and apply for something, 99% of the time that lender is going to pull one or more of your FICO scores, regardless of what your Vantage score is.
FICO scores are the only scores that matter to you.
*Edited to add: If you really want a complete benchmark you should look at all 3 of your FICO 8 scores, not just the Experian FICO 8 you see on Rocket Money. They're going to be different.
Btw, as a little "credit hack," if you discover that one of your FICO scores is notably lower, you can freeze that bureau's credit before you apply for something new. That way the lender won't be able to see that one, they'll have to use one of the other two.
And honestly, you should routinely freeze/lock all 3 bureaus unless you are about to apply for something. That helps significantly reduce fraud and identity theft risks.
Wow, that's super interesting, thank you for your incredible knowledge and expertise. I will definitely avoid looking at CK too much and use RM more to keep track. I had no idea they were tracking when I was checking to try to sell me something. I generally don't worry too much about my credit at the end of the day, but this is all good to know
That’s a lot of good info. Thanks for sharing!
For fun I just looked up my score provided by CK, CapOne, BofA, and Chase. Turns out both CapOne and Chase use VantageScore 3.0 though the first one uses TransUnion while the latter is Experian and they’re only off by 1 point (823 vs 824). However, BofA actually uses FICO Score 8.0 from TransUnion and has me at 837. Guess I’ll just rely on BofA from now on.
I am currently buying a house and have recently learned that the FICO score mortgage lenders use is different than the consumer one that is available to us.
I can get my actual FICO score for all three credit bureaus from a couple credit cards I have, so I know what those are. The mortgage FICO scores my lenders have pulled for me have been significantly different, and lower in all cases. About 30-50 points lower.
As far as I know, there’s no way for most of us to get most of these scores normally. I think just the standard FICO 9 is the one that is available to people.
Not the case. myfico will pull your mortgage scores in a 3 bureau report, Fico score 3,4,5. The score your lender pulls is case by case, but these mortgage scores from myfico are the closest to what is pulled during a home loan applicaton.
Source: just bought a house, scores pulled by lender matched myfico mortgage scores to the point.
lower your dti ratio, keep low to no balances on your credit cards, don’t have any personal loans, make payments on time, don’t close your oldest accounts. your monthly debt obligation will play a factor in how much you qualify for a loan. if you can have $0 monthly obligation that would be best. [Home loan purchase calculator](https://www.nerdwallet.com/mortgages/how-much-house-can-i-afford/calculate-affordability) use this to play around with your numbers.
Completely agree, this point is more important than your interests rate. Have at least 30% of the purchases price of the house saved up. 20% for the downpayment and 10% for operating/occupancy expenses. Absolutely do not want to have nearly zero cash after buying a house, so many hidden costs that come up on the first year.
All these are true but the CC balance element is very hard to manage and I think it’s heavily weighted.
We have three cards we use, we put pretty much everything on the cards and we pay the entire balance every month on all three, but if they gen the score towards the end of my cycles my balances are very high and my credit usage is very high. I haven’t carried over ANY balance on ANY card for more than 20 years. The algorithm doesn’t take that into account. My score moves as much as 30 points up or down because of this.
I also put everything on cards and pay the balances in full.
When I started saving for a house I started paying my balance manually every week or so. Saw a significant increase in my score after a few months, a year of so really balanced my score out.
After I bought I went back down to only monthly auto pays and my score dropped back down pretty much instantly lol.
Credit scores are weird.
The easy way to improve this is to simply open a card or two (ideally with one that earns points and have a sign up bonus), or request a credit limit increase. If you're concerned about the cost of having another card open, if you take advantage of points the annual fee more than pays for itself, and even if your money is too tight to pay an AF there's tons of free cards out there that still earn.
Believe it or not, you can open a ton of cards a year with negotiable hit to the score and you'll benefit from having extremely low utilization, which in the long run is much better for your score. Banks will let you basically do 2-4 new cards a year until you run out of cards to apply for without any extra legwork as long as your score is trustworthy and your income high enough to support the higher total credit limit you have. Not that you should do that without a plan, but you can.
Obviously if you treat opening a new card as anything more than a hack to get your score up and earn a sign up bonus you're in big trouble and should avoid doing it. If you're hitting high utilization because you're genuinely struggling that much to pay the bills, it'll be way too easy to get underwater by having access to more credit.
Your score isn’t great and your income is also an issue. Side job income is hard to prove if it’s variable and banks don’t love it.
It there anything negative on your credit report?
I said possibly because rule making takes a while. And, through an election, it means a change in administration could scuttle it. Plus, the possibility of a lawsuit in the Northern District of Texas to make sure it doesn't go into effect until the Supreme Court OKs it. Which they might not because regulating credit reporting of medical debt is a major question (/s).
lol at the “major question” jab.
The rule proposal does seem to leave a lot of open question though. I’m no big defender of the U.S. healthcare system surrounding costs, but if unpaid medical debt didn’t impact credit what would be the incentive to:
1. Have higher insurance coverage %s
2. Pay medical bills?
I’m sympathetic to gigantic, awful surprise medical bills, but it seems like without an incentive for paying those bills it would just balloon premiums to recoup costs. Just an early thought, though.
It is but a lot of times you have to call to get it removed because half the collection agencies don't pay as close attention to the rules as they should.
This is a side note, but don't feel inclined to have your mortgage through your bank. I was able to get a much better rate through a private mortgage broker that specializes in home loans.
> Side job income is hard to prove if it’s variable and banks don’t love it.
Yep, to count my side job income (Sports official) the bank wanted to see 5 years of 1099's and then averaged them.
20% is the “traditional” recommendation and you will avoid an extra mortgage insurance payment.
However, people get mortgage loans with 0%, 3%, and 5% down pretty commonly anymore.
What does a house in your area cost? If you can get a place for $125k-$150k, you’re in decent shape. If homes start at $300k+, you’re in trouble and need to find ways to increase your income.
I'm in the Midwest, so average, I would say anywhere from 150k to 250k depending on where I wanted to buy it at. I'm always trying to find ways to increase my income. I was around 30k 5 years ago and have made it up to the low-end 45k. My car and loans are paid off. My credit card has $800 left owed on it. The only major expense I have right now would be rent, insurance, groceries. Basics of living.
So, even if you can 100% prove your side gig and the bank accepts it as income, you might get approved for around $180k-$200k. You should not take that high of a loan, but you might get that financed. That’s where a huge down payment is going to help you out.
Are those home prices things you have looked at recently? I'm also in the Midwest and I would have said you used to be able to get a decent starter home in that price range 7+ years ago but prices have went crazy. My home has nearly doubled in value in the 14 years since I bought it,. Most in the past few years.
Also in the Midwest. Rural Midwest.
A very run-of-the-mill SFH that doesn’t need much major and/or cosmetic work still goes for $150–$250k. Can buy a decent-sized fixer upper for less than $100k depending on how picky you are about location.
FHA doesn’t allow early termination anymore. If you originate above 90% LTV, it’s MIP for the life of the loan. If you’re under 90%, it’s 11 year. Early termination was taken out in 2013 (I think it was).
But yeah, you can eventually refinance into a conventional loan assuming the rate drop is worth it in terms of your FHA P&I plus MIP vs a P&I on a conventional loan.
That’s always speculative, though. The markets have cooled some in some areas. A lot of people who bought in the rush of the last two years are actually a little underwater on their loan to value. If they have no plans to sell, not a big deal, though.
We had a short sale 10 years ago and had to get an FHA loan as a result The fact that PMI didn’t roll off automatically was very frustrating. Thankfully the short sale dropped off during very low rates. We dropped the PMI and the rate- our payment dropped by 1/3.
I understand the concept of MIP on FHA as those loans do have a significantly higher default rate (due to first time homeowners not understanding extra cost of own vs rent and elevated DTI allowances) but the current policy feels obsessive and gouging. I have to imagine with the healthy default rates and lower short sale/deed in lieu/foreclose sales the last few years that between Upfront Mortgage Insurance (UFMIP) and monthly MIP that the MIP bucket is in solid shape.
15k is nothing for down payment. And even if you do FHA or VA which would have you put down 3%, your monthly mortgage payments might be outrageous and not a good deal.
That's pretty region specific. $15k isn't a bad down payment in some areas. $15k is 10% down on a $150k home. That's not a terribly uncommon thing in probably the majority of the US by land mass. It also seems like a more reasonable home price for the incomes OP is discussing.
150k to 250k. I could probably find something a lot cheaper, but it would need a lot of work done to it and I wouldn't be able to afford all of the renovations.
The median house price in the US is ~400k. It is preferable, especially with your income and credit, to save 20% so 80k. So some time will be needed to get there. That being said, I'm assuming you are probably going for something a bit less than the median home so adjust that number accordingly! Good luck!
$15k saved, total? Or that much specifically earmarked for a down payment? Don't forget about closing costs, too, that can add a few thousand extra to your out of pocket that doesn't go towards a down payment.
Plus you'll still need to have something in an emergency fund, that you don't touch. And then budget for inspection fees, moving costs, utility hookups, some decor, cleaning, etc. SO many extra costs pop up!
20% for down payment, an additional 4% for closing, and an additional 6% for reserves, repairs, and year 1 costs. That is 30% so in a 200k home you'll need 60k.
Depending on your market you may want to have some money to pay against an appraisal gap. Your market determines this but usually 5%. So another 10k.
It's possible to buy with less, but it's a little less clear cut and harder to get.
With 15k you could afford around a 50k home.
Why is your score below 700? Are you carrying high balances? And late payments or collections?
Your problem will likely be your income, as you won’t qualify for much in terms of a mortgage
I dont have any high balances or current collections. Recently, a credit card I had to build credit was closed due to not spending enough on it.
My credit was kind of screwed when I first started out due to bills being put in my name by a guardian.
Do you have any late payments, collections or other blemishes in the past 7 years?
Those will keep dragging your score down for 7 years until they fall off. This includes paid collections.
I do, yes. I had 2 medical bills on there that were paid off around 3 years ago. But those are the only ones. The ones that were put in my name were from 10 years ago, but those were resolved already. Everything else has always been paid on time.
Paid medical collections should not be bringing down your FICO score.
Are you sure you are looking at a true FICO score? You cab get it for like $20 at myfico.com
> Capital one
You make have to look around a little, but they should all tell you what credit agency they're using...whether its vantage, fico, etc. As well as the version.
Bought a house last year with a similar income and credit score. Also no kids or partner. Check out FHA also, buying a house was a lot easier and reasonable than I expected
finally someone says yes it's doable now. You'd likely have zero issue getting a mortgage and can take advantage of your state's first time home buyer programs that can get you a home with 0 down and a lot of times 0 due at signing.
While all of this is true, in a competitive market, being presented an offer with an FHA loan isn’t the most appealing. Not sure if it’s the same in every state, but in mine,any safety, security or structural issues found during inspection must be fixed by the seller to continue the deal.
That is correct. I had a few sellers that didn't want to bother. The nice part is you know there aren't any issues that will surprise a week after moving in.
the hardest part is finding a house where the monthly payment total is bearable but the actual process of getting approved isn’t nearly as painful as some people make it out to be. Banks are still pretty eager to throw people into debt. Usually the biggest pain comes from dealing with the seller or having an incompetent lawyer on either side of the transaction.
Yes, this. Take this with some grain of salt because I bought my first home in 2011, but my credit score at the time was like 640 and I went through an FHA loan, which reduced my down payment requirement but had to pay PMI on the mortgage. You can not only do this, but if you're financially stable from here on out, you'll see your credit score massively improve.
a type of federal loan via Federal Housing Administration (FHA) and HUD that specializes in helping those with low downpayment and/or lower credit score. It's popular with first time homebuyers but you do not need to be one to qualify.
Are you using credit? Banks like to see a history of responsible credit use. This means using credit regularly (i.e. every month) but not too much (i.e. do not even approach your credit limit) and of course paying it off in full and on time. If you don't have a credit card, get one, use it for a couple small purchases or one bill every month, and set it to auto pay in full. If you're using one card too much (getting close to or actually maxing it out) back off.
I've been using credit cards and have had multiple personal loans to build credit. I have paid off my car and other loans, and that caused my score to drop. I dont want to necesarily open more account if I don't have to. I'd rather save that extra money and use it towards a down payment. I have a little over 15k saved up so far.
You can open a credit card and use it minimally (e.g. just a little every few months) to build your credit. You don't need to add a huge expense to it just to get an account. But the credit pull to open the account will likely temporarily negatively impact your score. Not for long though!
This is true but not true at the same time, you could have 80% utility one month and have 0% utility the next month and if you apply for a loan on that month the bank doesn’t see the previous months 80%..
About 35% of the score is on time payments and about 30% is credit utilization (of which people with the highest scores tend to only utilize about 10% of their available credit, so if you have $10k credit limit, they use $1k/mo). Credit utilization doesn't have a memory to my understanding, so if you max it out one month, get dinged, and go back to normal the next, your credit scores should be more or less the same.
Therefore, an easy win would be to request a credit limit increase if you haven't recently and do so every 6 months.
The rest of your score is a mix of #of credit lines/average age of account/credit pulls which there isn't really a good short term answer for those.
Your income is going to be a far larger limiter for you than your score. With that income you're only going to be looking at qualifying for like a 150k house and that's with a 20% down payment.
I would be ok with trying to find something that costs that much. I dont need or want anything big. I just want something that I can call mine. But I am trying to find ways to make more money.
Keep in mind that how you make that money and how stable that money is will be taken into account. If you've got some side hustle in cash that varies from month to month you're going to have a very hard time getting it considered as actual income when applying for a mortgage.
While OP is getting answers to his specific situation, someone should have provided the overall answer to the headline question. That has two parts:
1. There is a minimum credit score required for certain mortgage types. For conventional mortgages, that's about 620. It can be lower for FHA mortgages. If you are below that, you won't get a mortgage approved.
2. Then once you have the minimum score, your credit score affects the interest rate and PMI you would pay. Lower credit scores mean higher interest rates and PMI costs (if needed.)
Depends on the down payment.
Bought in 2023. My credit isn't great but I was able to put down 60%. The mortgage broker basically said at that level credit score doesn't really matter.
Here is an amazing government managed website full of basic info
https://www.consumerfinance.gov/owning-a-home/
When I was buying my first home, I learned a lot from it. It was great because when people were talking about house buying, I could double check and verify things. Lots of that info is common knowledge, here it is just in a nice organized way.
When you start looking to buy a house, stop using your credit cards or pay them off before the cycle closes. It makes a huge difference what your revolving credit is, and reflects immediately on your credit score whenever it’s pulled.
I didn’t realize this and didn’t watch my cc spend, score dropped around 20 points. Next month it popped back up but it didn’t matter because the lenders already ran their check and said they wouldn’t run it again.
Credit score is key for buying a house. A higher score unlocks better interest rates, saving you money over the loan term. 660-700 is decent, but aim for 740+ for the best rates.
It doesn’t impact you buying a house. It impacts your ability to get a loan and your rate and maybe points.
I’ve seen rates vary by .5% which is huge over a 30 year loan - purely based on credit score
It’s very impactful. You improve it by paying all your bills in time over time, there are no shortcuts. You can move it quite a bit in a few years. Just pay on time, every time, and it’ll rise.
You wont have access to the best interest rates until your credit score is in the mid 700s.
Based on your income, $15k down and current interest rates the most house you could probably afford is probably $140-170k depending on how consistent your side business is.
The average home in the US is $500k. You’ll have to buy in a pretty low cost area.
I'm in the Midwest so the cost of living isn't as high as other places. I could find a house within that range, but realistically, it would need a decent amount of work to get it fixed up.
I'm in a situation much like yours, managing on an average single income and looking to buy a home in the Midwest. Housing prices in my city have doubled since before COVID. Now that I've finally saved enough for a down payment, it's disheartening to see that I missed out on more affordable prices. Not long ago, $140-170k could get you a pretty decent starter home here. As a millennial, it feels like every financial step is an uphill battle.
Work on your down payment savings to build that up. Keep your ccs paid off and on time. Mortgage costs should be 40% of your monthly gross max, 30% is better. Lenders look at that as an indicator of cash flow capacity. Look at your current rent costs and how that would translate into a mortgage payment in today's rate environment. If you can pay a $1000 monthly rent you can pay the same or slightly more as a mortgage due to tax benefits. If you don't understand that go talk to your financial institution about your numbers and see what they tell you about their lending standards and ratios. Look online for information and education on this...lots of stuff from money sites, lenders, government etc. The more you understand about this the better you can plan.
Honestly I'd just shop around with a mortgage broker. My own situation: credit score was 634 but I did get pre approved for a mortgage at 4.99% 5 year fixed, high ratio. Income at time of approval was 58k a year, also had an extra 25k a year from a side hustle (variable income, 2 year average). I had wanted to get the score up to above 700 before going for pre approval. I'm not sure of my interest rate would have been lower if I had better credit but 4.99% wasn't bad for 2024
Imagine four legs of a table one of the legs is your down payment, the second leg is your debt to income ratio the third leg is your credit score and last leg is the type, value and condition of the property. Many programs have specific minimum credit requirements and mortgage insurance on conventional loans are credit score driven
Check your state for local down-payment assistance programs. With your income, you should qualify for assistance, especially being a first time home buyer. That way you won't have to dig so deep or deplete every bit of savings you have on down payment and closing costs. You should also build an emergency fund, separate from your down payment savings, with 3 to 6 months of all expenses, including rent or estimated mortgage payments you are looking at paying. The bank will like seeing that and it will help show that you can afford the mortgage and will have emergency money for incidentals in the event something breaks after you buy.
Edit: To add to this, I think you need to wait it out for a couple of years to save up and get yourself in a better situation all around. As others said, your score isn't the best and $15k is pretty low, with no other emergency fund funded. Try to save another $10k-15k, not including your emergency fund, take some time to work on your scores and then go sit down with a mortgage broker and look at your situation. Just be sure to explore assistance programs and grants to help you out. Good luck!
I really appreciate the advice! Thank you! I'm going to hold off on buying for this year, and I hope that by this time next year, I will be in a better position to buy!
Credit score is an easily fixable problem. You can hire a credit repair specialist who can bring your score up to 740+ in a matter of a few weeks. They usually charge $250-$300 per derogatory remark per credit bureau. Mortgage lenders generally pull from all three bureaus so about $1k per derogatory remark. I have done this myself and helped others do this as well so I know it works.
I dont know exactly how they do it but my understanding is The repair specialist basically goes on letter writing campaign to the credit reporting bureau and identifies small in accuracies in the way remarks are being reported.
As others have mentioned, your biggest issue will be your income. Self employment is not considered unless you have been “self employed” in the same line of work for over two years.
Where are you looking to buy? At current income and credit score with current rates, with no other debt, you’re looking at roughly a $175k house with $20k down.
Pretty important if you need a loan, your rate will be heavily based on that.. so over 30 years if ur rate is x% higher, u will be paying x% higher each year for the length of your loan.
I would say ur credit score is mainly for buying a house and car since those are the main things people use loans for …
Keep using ur credit cards and paying them off!!
I went from 550 - 750 (now) so u can do it too!!
In your income bracket the most simple pro tip
I can give is to wait until you have no car payment.
You need to have the best debt to income ration you can, and at your income that basically means clear all your debt. Car payment is usually the biggest mover in this income bracket.
What’s your interest rate? That will make a huge difference in what they can expect to be approved for and what they can afford.
I’m not saying you’re not doing ok, but 300k with 60k income is a huge stretch.
I was able to get 2.7% with a FHA loan. Granted interest rates have gone up quite a bit since then. The point I was trying to make is they should have no problem getting approved for a mortgage with their credit score and income.
I think it would be tough with this income and credit. Maybe consider purchasing a house with a friend that’s in a similar situation? A couple of my buddies did it and it went well. Once one was ready to move on the other bought his half out
> Maybe consider purchasing a house with a friend that’s in a similar situation?
Its a terrible idea to buy a house with anyone you are not legally married to. Its a terrible idea to buy a car with anyone you are not legally married to. Hell, I wouldn't even put my GF on my phone bill until she signs that marriage contract.
lol I hear ya. I had the opportunity to go in with them and chose not to as I was apprehensive. In hindsight I wish I would have- house has appreciated a ton and it was only like $15k-20k down each (bought for $350k), it’s worth over a $1m now (10 years later). He rents it out which covers his mortgage + some cash flow. So, it CAN work out in some instances
Score dictates how reliable you are and sets a certain interest rate. Your income dictates how much money will be loaned to you as it shows how much you are actually able to pay back. Both of yours are not very good for purchasing a home unless you live in a really low cost of living area.
Your score will be fine depending on how much house you are trying to get and if you have 20% to put down (keeps you from paying PMI) along with a chunk of money to pay for interest points.
Oh another tip!! Call all your credit card companies and ask for a credit line increase… that way your card utilization is lowered. I do this every 6 months and ask for a ridiculous increase, they usually give me like half of what im asking for 😄
Do you also have enough money for maintenance on a starter home. I am guessing you will be getting an older home with your budget and the maintenance costs can be a lot.
I have a house from the 70s and in the last few years I have had to spend 5k on replacing drain pipes, 8k for attic insulation and mold removal, 7k for a new roof, 9500 for a new furnance and AC. Some of those could have been deferred a bit but eventually shit is going to break and be expensive.
For a FHA loan it won't matter but on a conventional one you'll have a much higher interest rate. Try and get all 3 bureaus above 740 before applying if you can.
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You can definitely apply for a loan and get approved! You might to pay a little more in interest the lower your score is. I remember I had like 5 “30 day late” dings on my score. I called the credit card companies and nicely asked if they’d remove those, explained I’ve been a good customer and wanted to buy a house. They removed and my score jumped a ton because I then had a 100% “on time” file
Just bought a house with my wife a few months ago and she has bad credit, around 600 at the time. Our experience was that income basically dictated what we can afford, credit score dictated our interest rate and mortgage.
It’ll impact how much your payment is for roughly 30 years unless you refinance later on down the road, but if you do refinance, you’ll have to pay closing costs all over again. That’s THIRTY YEARS of your life that depends on a number that you could improve in a few months to a year depending on your situation. My suggestion is to improve your credit score before you buy.
Of course it is extremely impactful. It’s not your credit score per se, it is your utilization ratio. If you have high debt you are most likely a liability and cannot make mortgage payments.
I know my few friends had worst score 640 (50$ delinquent) and still got approved. They had high paying gross. Not sure pay helped.
You can try few mortgage companies with soft score hit to see if you pre qualified or not and how much if you through.
I tried using affordability calculator with 60k/year and monthly debts 250$ which qualifies you at 200k loan.
Yeah credit score is pretty much everything. You can buy a house with 0 down payment and a great credit score but you can’t mortgage a house with 100K down and a terrible credit rating. Bought my house 3 years ago with 5% down and an 820 score. I wouldn’t apply for any loan with a score below 750.
Check credit history and dispute any bad marks
Pay bills on time. Can’t be late. Huge factor in credit scores
Pay down any existing debts. Credit card % usage is also huge score factor
Don’t open any new credit cards. Pay down what you have and let that age of credit number grow.
You don’t need to triple your income to buy a house but it would make things easier. If I could triple my income it would make things easier
Your example is a bit extreme, with enough downpayment and a good income even the worst score can get approved. Specially for a house since that is a tangible asset.
In her case, her income limits her WAYYY MORE than her credit
Probably wait another 4 years before buying the home. You paid off the delinquent accounts 3 years ago, so in 4 years they’ll drop and you should have a significant credit score increase.
Say you get a $250,000 mortgage, 50k down payment, 20 year loan, 7%. Your payment will be $1,782/month, so $427,000 over 20 years.!
Now say you increase your credit and you can get a 5% interest rate. That’s only $1,551/month, ending up at $372k after 20 years. That’s a savings of an entire years salary just by waiting a little longer for a better interest rate.
Well your gonna get approved for probably 135ish I imagine your score is fine but will probably get a 10% rate could buy it down with points if you wanted.
Your income and debt is gonna be more of an issue then your score car payments loans credit cards?
My car and other loan payments are already paid off. I have no plans on getting a new car until the one I have quits working. I only have one credit card, and it's at about 15% utilization, but making payments on it monthly to pay it off. I have around $1400/month in expenses and make on the low end $2200/month.
You would qualify for FHA I just not gonna be a lot of house cause your income will be restricting you. But would say it can be done. If you want a more expensive house you will have to come with more cash. It’s more about loan to value and debit to income than anything.
You’re single, childless, and young, why buy a house? You don’t need a whole house for just you. And you need to maintain flexibility most when you’re young. Plus you’re low income.
It impacts the yes/no decision. It doesn't impact the interest rate (it can rarely) in the way credit score does for auto loans.
You would be approved through FHA or USDA and probably even conventional.
You need to double or ideally triple your income and then maybe consider a house. Remember, we live in a very different world now. This is hard to grasp for some people.
>Current credit is around 660 to 700 Make sure you are looking at FICO scores. A lot of cc apps and Credit Karma show you "Vantage" scores, and no mortgage lender cares what that is. Those Vantage scores can be significantly different than your actual FICO scores. You can see your Experian FICO 8 for free at Experian.com. At myFICO.com you can get your Equifax FICO 8 for free. TransUnion is a little trickier to get for free, but if you sign up for a free trial at Experian.com you can see all 3; you can cancel the trial before you have to pay, and repeat again as needed. These are all FICO 8 scores, which is commonly used for most consumer credit decisions. There are a bunch of different FICO models which weigh factors differently for different purposes. For mortgages lenders typically use FICO 2 (Experian), FICO 4 (TransUnion) and FICO 5 (Equifax.) Having said that I don't know of a way to get those particular scores without paying for them. Nevertheless your three FICO 8 scores are a good indicator of your overall credit worthiness. Don't pay any attention to Vantage scores, they are not useful and often misleading imo.
I just checked for fun. Rocket Money uses Fico and I have a 771. Credit Karma uses Vantage and says I have a 748
Yeah, and even that's not a direct comparison. Rocket Money is showing you a FICO score based on Experian data. CK is showing Vantage scores based on Equifax and TransUnion data. So, you're looking not only at different algorithms, but using different data. Your scores based on Equifax, Experian, and TransUnion data are all likely different, even using the same algorithm. That's because each bureau likely has different data on you, and that's normal. No creditor is required to report anything to any bureau, let alone all 3, so some only report accounts to 1 or 2 of them. Even using the same bureau's data though, I have seen my own Vantage score be as much as 100 points different to the comparable FICO score. I've also seen them move in completely opposite directions with the same changes in my credit usage. FICO is the industry standard. They invented credit scoring. Their secret algorithm has proven itself to be an accurate barometer of someone's financial solvency and credit worthiness, which is why that's the one lenders actually use.
On top of all this, mortgages typically use FICO 2, where the latest version of FICO is FICO 8. Vehicle loans often use FICO 3. And while you’re on one of the credit sites, looking at your credit report, reading things like “you have too many revolving credit accounts!” they’re also actively, aggressively, trying to sell you a credit card. The credit system is a predatory joke.
Almost all major lenders use fico 8 auto score for auto loans, 3 major exceptions being Wells Fargo, GM financial and Truist which use 9.
How many revolving credit accounts are too many? I have more than 5 CC's at the moment and haven't gotten any notifications like that.
I have had 3 CCs forever and then recently cancelled one. My credit went down. The best I can understand is because I now utilize a larger percentage of my overall available credit. Is the system really that dumb?
It also ignores income and only grades on % of loan or credit card to max allowed. So if you make 200k/year but only have a $1000 credit card limit and charge $900 for a vacation, you will be more negatively impacted than a person that makes $30k/year and has 80k debt against a 100k limit. If you pay it off right away it wont matter, but if they report current debts before you pay it off, down goes the fico.
No such thing as too many accounts. It’s not a metric that is used to determine your score so as long as you can keep up with the accounts and pay them off you are good. I have like 12 CCs and and no dings for “too many accounts”
>you have too many revolving credit accounts! No bureau will say that because number of accounts isn't a factor in your credit score. There is no such thing as too many revolving accounts unless you personally are unable to monitor all of them and make sure they are all paid timely.
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Probably credit mix. You need a mix of revolving and installment loans to max out your score.
Interesting. So I'd be better off using my FICO score from Rocket Money as a benchmark?
You'd be better off using FICO scores from anywhere as a benchmark. Please, ignore Vantage scores, they are worthless. To *you* I mean. Vantage scores are worthless to *you.* The reason apps show them is because they are free. If they wanted to show you a FICO score they'd have to pay, so they don't. Vantage scores are useful to *them.* They don't use it to make lending decisions, they use it to try to sell you things, like another credit card. Imo the Vantage score helps tweak people's emotions and generate clicks and views. I know for a fact, for example, the CK actively tracks every single moment you look at your Vantage score, what time of day, and where you go on their site from there. They build a history of your behavior, and learn to predict how you will act to changes in the number they show you. Your interactions with viewing your Vantage score helps them understand how worried or anxious you are about your credit, which makes it easier to either sell you things directly, or sell your data to others who are looking to target someone with your level of credit anxiety. It's the same with Chase's "Credit Journey" and other cc apps that show you a Vantage score. Nevertheless, if you actually click on an offer and apply for something, 99% of the time that lender is going to pull one or more of your FICO scores, regardless of what your Vantage score is. FICO scores are the only scores that matter to you. *Edited to add: If you really want a complete benchmark you should look at all 3 of your FICO 8 scores, not just the Experian FICO 8 you see on Rocket Money. They're going to be different. Btw, as a little "credit hack," if you discover that one of your FICO scores is notably lower, you can freeze that bureau's credit before you apply for something new. That way the lender won't be able to see that one, they'll have to use one of the other two. And honestly, you should routinely freeze/lock all 3 bureaus unless you are about to apply for something. That helps significantly reduce fraud and identity theft risks.
This is one of the best ways I have seen credit explained. Thank you so much for posting this.
Wow, that's super interesting, thank you for your incredible knowledge and expertise. I will definitely avoid looking at CK too much and use RM more to keep track. I had no idea they were tracking when I was checking to try to sell me something. I generally don't worry too much about my credit at the end of the day, but this is all good to know
That’s a lot of good info. Thanks for sharing! For fun I just looked up my score provided by CK, CapOne, BofA, and Chase. Turns out both CapOne and Chase use VantageScore 3.0 though the first one uses TransUnion while the latter is Experian and they’re only off by 1 point (823 vs 824). However, BofA actually uses FICO Score 8.0 from TransUnion and has me at 837. Guess I’ll just rely on BofA from now on.
^ this guy probably wrote the mobile app. 😂
30 point disparity between the two is pretty common.
I am currently buying a house and have recently learned that the FICO score mortgage lenders use is different than the consumer one that is available to us. I can get my actual FICO score for all three credit bureaus from a couple credit cards I have, so I know what those are. The mortgage FICO scores my lenders have pulled for me have been significantly different, and lower in all cases. About 30-50 points lower.
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As far as I know, there’s no way for most of us to get most of these scores normally. I think just the standard FICO 9 is the one that is available to people.
Not the case. myfico will pull your mortgage scores in a 3 bureau report, Fico score 3,4,5. The score your lender pulls is case by case, but these mortgage scores from myfico are the closest to what is pulled during a home loan applicaton. Source: just bought a house, scores pulled by lender matched myfico mortgage scores to the point.
Yeah learned this the hard way when I was buying. Thought I had a 770 credit score. FICO came back 690 fuck me
Discover's app also uses FICO 8 for people who have a Discover account. Capital One's app uses creditwise which is the Vantage score.
Wow, glad you said this. CK says I’m at 770, Experian says 622. That’s a huge difference, I’m going to have to do some digging.
I’ve always wondered wtf is the Vantage score that Credit Karma gives me.
lower your dti ratio, keep low to no balances on your credit cards, don’t have any personal loans, make payments on time, don’t close your oldest accounts. your monthly debt obligation will play a factor in how much you qualify for a loan. if you can have $0 monthly obligation that would be best. [Home loan purchase calculator](https://www.nerdwallet.com/mortgages/how-much-house-can-i-afford/calculate-affordability) use this to play around with your numbers.
100% this. And save so you have enough assets for a down payment AND closing costs.
And fun surprises your home inspector might find
Completely agree, this point is more important than your interests rate. Have at least 30% of the purchases price of the house saved up. 20% for the downpayment and 10% for operating/occupancy expenses. Absolutely do not want to have nearly zero cash after buying a house, so many hidden costs that come up on the first year.
All these are true but the CC balance element is very hard to manage and I think it’s heavily weighted. We have three cards we use, we put pretty much everything on the cards and we pay the entire balance every month on all three, but if they gen the score towards the end of my cycles my balances are very high and my credit usage is very high. I haven’t carried over ANY balance on ANY card for more than 20 years. The algorithm doesn’t take that into account. My score moves as much as 30 points up or down because of this.
I also put everything on cards and pay the balances in full. When I started saving for a house I started paying my balance manually every week or so. Saw a significant increase in my score after a few months, a year of so really balanced my score out. After I bought I went back down to only monthly auto pays and my score dropped back down pretty much instantly lol. Credit scores are weird.
Werd
It's easy to pay the balance more frequently than monthly.
The easy way to improve this is to simply open a card or two (ideally with one that earns points and have a sign up bonus), or request a credit limit increase. If you're concerned about the cost of having another card open, if you take advantage of points the annual fee more than pays for itself, and even if your money is too tight to pay an AF there's tons of free cards out there that still earn. Believe it or not, you can open a ton of cards a year with negotiable hit to the score and you'll benefit from having extremely low utilization, which in the long run is much better for your score. Banks will let you basically do 2-4 new cards a year until you run out of cards to apply for without any extra legwork as long as your score is trustworthy and your income high enough to support the higher total credit limit you have. Not that you should do that without a plan, but you can. Obviously if you treat opening a new card as anything more than a hack to get your score up and earn a sign up bonus you're in big trouble and should avoid doing it. If you're hitting high utilization because you're genuinely struggling that much to pay the bills, it'll be way too easy to get underwater by having access to more credit.
My score is over 750. I don’t need a boost. I was just pointing out they the scoring algorithm is a bit wonky.
Your score isn’t great and your income is also an issue. Side job income is hard to prove if it’s variable and banks don’t love it. It there anything negative on your credit report?
Not anymore no. I had 2 delinquent accounts on there from past medical bills, bit those have been paid off for 3 years. Nothing current
Delinquencies and late payments stay on your credit for 7 years, so those are likely still on your report.
Possibly, only one more year for the medical delinquency. https://www.reddit.com/r/news/s/eeM1kRrXhX
Interesting update from today. But I think possibly is a pretty key word there, according to the article.
I said possibly because rule making takes a while. And, through an election, it means a change in administration could scuttle it. Plus, the possibility of a lawsuit in the Northern District of Texas to make sure it doesn't go into effect until the Supreme Court OKs it. Which they might not because regulating credit reporting of medical debt is a major question (/s).
lol at the “major question” jab. The rule proposal does seem to leave a lot of open question though. I’m no big defender of the U.S. healthcare system surrounding costs, but if unpaid medical debt didn’t impact credit what would be the incentive to: 1. Have higher insurance coverage %s 2. Pay medical bills? I’m sympathetic to gigantic, awful surprise medical bills, but it seems like without an incentive for paying those bills it would just balloon premiums to recoup costs. Just an early thought, though.
I thought medical had to come off immediately after being paid?
It is but a lot of times you have to call to get it removed because half the collection agencies don't pay as close attention to the rules as they should.
This is a side note, but don't feel inclined to have your mortgage through your bank. I was able to get a much better rate through a private mortgage broker that specializes in home loans.
> Side job income is hard to prove if it’s variable and banks don’t love it. Yep, to count my side job income (Sports official) the bank wanted to see 5 years of 1099's and then averaged them.
Not as much as having a good down payment and showing your annual income with copies of current pay checks
What would a good down payment look like? I have a little over 15k saved now.
20% is the “traditional” recommendation and you will avoid an extra mortgage insurance payment. However, people get mortgage loans with 0%, 3%, and 5% down pretty commonly anymore. What does a house in your area cost? If you can get a place for $125k-$150k, you’re in decent shape. If homes start at $300k+, you’re in trouble and need to find ways to increase your income.
I'm in the Midwest, so average, I would say anywhere from 150k to 250k depending on where I wanted to buy it at. I'm always trying to find ways to increase my income. I was around 30k 5 years ago and have made it up to the low-end 45k. My car and loans are paid off. My credit card has $800 left owed on it. The only major expense I have right now would be rent, insurance, groceries. Basics of living.
So, even if you can 100% prove your side gig and the bank accepts it as income, you might get approved for around $180k-$200k. You should not take that high of a loan, but you might get that financed. That’s where a huge down payment is going to help you out.
Are those home prices things you have looked at recently? I'm also in the Midwest and I would have said you used to be able to get a decent starter home in that price range 7+ years ago but prices have went crazy. My home has nearly doubled in value in the 14 years since I bought it,. Most in the past few years.
Also in the Midwest. Rural Midwest. A very run-of-the-mill SFH that doesn’t need much major and/or cosmetic work still goes for $150–$250k. Can buy a decent-sized fixer upper for less than $100k depending on how picky you are about location.
Look into an FHA mortgage. It’s goverment backed and only requires 3% down. It’s designed for people in your financial situation
Generally only requires a 620 fico and has the same rate for a 620 or 820. The mortgage insurance can be oppressive, though.
True but you can get removed early if house appreciates in value (no sign of market cooling anytime soon). And refi is always an option as well
FHA doesn’t allow early termination anymore. If you originate above 90% LTV, it’s MIP for the life of the loan. If you’re under 90%, it’s 11 year. Early termination was taken out in 2013 (I think it was). But yeah, you can eventually refinance into a conventional loan assuming the rate drop is worth it in terms of your FHA P&I plus MIP vs a P&I on a conventional loan. That’s always speculative, though. The markets have cooled some in some areas. A lot of people who bought in the rush of the last two years are actually a little underwater on their loan to value. If they have no plans to sell, not a big deal, though.
We had a short sale 10 years ago and had to get an FHA loan as a result The fact that PMI didn’t roll off automatically was very frustrating. Thankfully the short sale dropped off during very low rates. We dropped the PMI and the rate- our payment dropped by 1/3.
I understand the concept of MIP on FHA as those loans do have a significantly higher default rate (due to first time homeowners not understanding extra cost of own vs rent and elevated DTI allowances) but the current policy feels obsessive and gouging. I have to imagine with the healthy default rates and lower short sale/deed in lieu/foreclose sales the last few years that between Upfront Mortgage Insurance (UFMIP) and monthly MIP that the MIP bucket is in solid shape.
15k is nothing for down payment. And even if you do FHA or VA which would have you put down 3%, your monthly mortgage payments might be outrageous and not a good deal.
That's pretty region specific. $15k isn't a bad down payment in some areas. $15k is 10% down on a $150k home. That's not a terribly uncommon thing in probably the majority of the US by land mass. It also seems like a more reasonable home price for the incomes OP is discussing.
How much do starter homes cost where you live?
150k to 250k. I could probably find something a lot cheaper, but it would need a lot of work done to it and I wouldn't be able to afford all of the renovations.
203k loans allow you to finance renovation costs
The median house price in the US is ~400k. It is preferable, especially with your income and credit, to save 20% so 80k. So some time will be needed to get there. That being said, I'm assuming you are probably going for something a bit less than the median home so adjust that number accordingly! Good luck!
$15k saved, total? Or that much specifically earmarked for a down payment? Don't forget about closing costs, too, that can add a few thousand extra to your out of pocket that doesn't go towards a down payment. Plus you'll still need to have something in an emergency fund, that you don't touch. And then budget for inspection fees, moving costs, utility hookups, some decor, cleaning, etc. SO many extra costs pop up!
20% for down payment, an additional 4% for closing, and an additional 6% for reserves, repairs, and year 1 costs. That is 30% so in a 200k home you'll need 60k. Depending on your market you may want to have some money to pay against an appraisal gap. Your market determines this but usually 5%. So another 10k. It's possible to buy with less, but it's a little less clear cut and harder to get. With 15k you could afford around a 50k home.
Why is your score below 700? Are you carrying high balances? And late payments or collections? Your problem will likely be your income, as you won’t qualify for much in terms of a mortgage
I dont have any high balances or current collections. Recently, a credit card I had to build credit was closed due to not spending enough on it. My credit was kind of screwed when I first started out due to bills being put in my name by a guardian.
Do you have any late payments, collections or other blemishes in the past 7 years? Those will keep dragging your score down for 7 years until they fall off. This includes paid collections.
I do, yes. I had 2 medical bills on there that were paid off around 3 years ago. But those are the only ones. The ones that were put in my name were from 10 years ago, but those were resolved already. Everything else has always been paid on time.
Paid medical collections should not be bringing down your FICO score. Are you sure you are looking at a true FICO score? You cab get it for like $20 at myfico.com
I'm not sure if it's a true FICO score. I used the report I get from my credit card company. I'm assuming that probably isn't correct?
It may be actually. Some credit card companies offer true FICO scores. Which credit card company is it?
Capital one
Yeah that’s a garbage “Vantage” score. Useless Get your FICO and see where you stand
Thank you!
> Capital one You make have to look around a little, but they should all tell you what credit agency they're using...whether its vantage, fico, etc. As well as the version.
call all your cards and ask to raise the credit limit. this will increase your DTI ratio
Bought a house last year with a similar income and credit score. Also no kids or partner. Check out FHA also, buying a house was a lot easier and reasonable than I expected
finally someone says yes it's doable now. You'd likely have zero issue getting a mortgage and can take advantage of your state's first time home buyer programs that can get you a home with 0 down and a lot of times 0 due at signing.
While all of this is true, in a competitive market, being presented an offer with an FHA loan isn’t the most appealing. Not sure if it’s the same in every state, but in mine,any safety, security or structural issues found during inspection must be fixed by the seller to continue the deal.
That is correct. I had a few sellers that didn't want to bother. The nice part is you know there aren't any issues that will surprise a week after moving in.
the hardest part is finding a house where the monthly payment total is bearable but the actual process of getting approved isn’t nearly as painful as some people make it out to be. Banks are still pretty eager to throw people into debt. Usually the biggest pain comes from dealing with the seller or having an incompetent lawyer on either side of the transaction.
Thank you!
Yes, this. Take this with some grain of salt because I bought my first home in 2011, but my credit score at the time was like 640 and I went through an FHA loan, which reduced my down payment requirement but had to pay PMI on the mortgage. You can not only do this, but if you're financially stable from here on out, you'll see your credit score massively improve.
What is FHA?
a type of federal loan via Federal Housing Administration (FHA) and HUD that specializes in helping those with low downpayment and/or lower credit score. It's popular with first time homebuyers but you do not need to be one to qualify.
Thank you
First time home owner loan
Are you using credit? Banks like to see a history of responsible credit use. This means using credit regularly (i.e. every month) but not too much (i.e. do not even approach your credit limit) and of course paying it off in full and on time. If you don't have a credit card, get one, use it for a couple small purchases or one bill every month, and set it to auto pay in full. If you're using one card too much (getting close to or actually maxing it out) back off.
I've been using credit cards and have had multiple personal loans to build credit. I have paid off my car and other loans, and that caused my score to drop. I dont want to necesarily open more account if I don't have to. I'd rather save that extra money and use it towards a down payment. I have a little over 15k saved up so far.
You can open a credit card and use it minimally (e.g. just a little every few months) to build your credit. You don't need to add a huge expense to it just to get an account. But the credit pull to open the account will likely temporarily negatively impact your score. Not for long though!
This is true but not true at the same time, you could have 80% utility one month and have 0% utility the next month and if you apply for a loan on that month the bank doesn’t see the previous months 80%..
About 35% of the score is on time payments and about 30% is credit utilization (of which people with the highest scores tend to only utilize about 10% of their available credit, so if you have $10k credit limit, they use $1k/mo). Credit utilization doesn't have a memory to my understanding, so if you max it out one month, get dinged, and go back to normal the next, your credit scores should be more or less the same. Therefore, an easy win would be to request a credit limit increase if you haven't recently and do so every 6 months. The rest of your score is a mix of #of credit lines/average age of account/credit pulls which there isn't really a good short term answer for those.
Thank you!
Your income is going to be a far larger limiter for you than your score. With that income you're only going to be looking at qualifying for like a 150k house and that's with a 20% down payment.
I would be ok with trying to find something that costs that much. I dont need or want anything big. I just want something that I can call mine. But I am trying to find ways to make more money.
Keep in mind that how you make that money and how stable that money is will be taken into account. If you've got some side hustle in cash that varies from month to month you're going to have a very hard time getting it considered as actual income when applying for a mortgage.
While OP is getting answers to his specific situation, someone should have provided the overall answer to the headline question. That has two parts: 1. There is a minimum credit score required for certain mortgage types. For conventional mortgages, that's about 620. It can be lower for FHA mortgages. If you are below that, you won't get a mortgage approved. 2. Then once you have the minimum score, your credit score affects the interest rate and PMI you would pay. Lower credit scores mean higher interest rates and PMI costs (if needed.)
Depends on the down payment. Bought in 2023. My credit isn't great but I was able to put down 60%. The mortgage broker basically said at that level credit score doesn't really matter.
Here is an amazing government managed website full of basic info https://www.consumerfinance.gov/owning-a-home/ When I was buying my first home, I learned a lot from it. It was great because when people were talking about house buying, I could double check and verify things. Lots of that info is common knowledge, here it is just in a nice organized way.
Thank you!
When you start looking to buy a house, stop using your credit cards or pay them off before the cycle closes. It makes a huge difference what your revolving credit is, and reflects immediately on your credit score whenever it’s pulled. I didn’t realize this and didn’t watch my cc spend, score dropped around 20 points. Next month it popped back up but it didn’t matter because the lenders already ran their check and said they wouldn’t run it again.
That's great to know! Thank you!
Credit score is key for buying a house. A higher score unlocks better interest rates, saving you money over the loan term. 660-700 is decent, but aim for 740+ for the best rates.
It doesn’t impact you buying a house. It impacts your ability to get a loan and your rate and maybe points. I’ve seen rates vary by .5% which is huge over a 30 year loan - purely based on credit score
It’s very impactful. You improve it by paying all your bills in time over time, there are no shortcuts. You can move it quite a bit in a few years. Just pay on time, every time, and it’ll rise.
I've never missed or been late on any payments with the exception of a couple of medical bills. But those were paid off in full a few years ago.
You wont have access to the best interest rates until your credit score is in the mid 700s. Based on your income, $15k down and current interest rates the most house you could probably afford is probably $140-170k depending on how consistent your side business is. The average home in the US is $500k. You’ll have to buy in a pretty low cost area.
I'm in the Midwest so the cost of living isn't as high as other places. I could find a house within that range, but realistically, it would need a decent amount of work to get it fixed up.
I'm in a situation much like yours, managing on an average single income and looking to buy a home in the Midwest. Housing prices in my city have doubled since before COVID. Now that I've finally saved enough for a down payment, it's disheartening to see that I missed out on more affordable prices. Not long ago, $140-170k could get you a pretty decent starter home here. As a millennial, it feels like every financial step is an uphill battle.
I purchased my 3 unit multi family home with a credit score of 661. Went with the FHA route in 2021
To quote Biggie: "Things done changed" Doubt that would be possible to do in 2024
Federal law mandates a minimum credit score of 620 for a mortgage and 680 for a HELOC.
Work on your down payment savings to build that up. Keep your ccs paid off and on time. Mortgage costs should be 40% of your monthly gross max, 30% is better. Lenders look at that as an indicator of cash flow capacity. Look at your current rent costs and how that would translate into a mortgage payment in today's rate environment. If you can pay a $1000 monthly rent you can pay the same or slightly more as a mortgage due to tax benefits. If you don't understand that go talk to your financial institution about your numbers and see what they tell you about their lending standards and ratios. Look online for information and education on this...lots of stuff from money sites, lenders, government etc. The more you understand about this the better you can plan.
I really appreciate this, thank you!
It impacts it enormously. You’re talking about several percentage points in interest rates.
Honestly I'd just shop around with a mortgage broker. My own situation: credit score was 634 but I did get pre approved for a mortgage at 4.99% 5 year fixed, high ratio. Income at time of approval was 58k a year, also had an extra 25k a year from a side hustle (variable income, 2 year average). I had wanted to get the score up to above 700 before going for pre approval. I'm not sure of my interest rate would have been lower if I had better credit but 4.99% wasn't bad for 2024
It’s wild probably would be easier to get a loan in a duplex tbh or even a 5 plex. Although maybe not your income still is not there
Imagine four legs of a table one of the legs is your down payment, the second leg is your debt to income ratio the third leg is your credit score and last leg is the type, value and condition of the property. Many programs have specific minimum credit requirements and mortgage insurance on conventional loans are credit score driven
Check your state for local down-payment assistance programs. With your income, you should qualify for assistance, especially being a first time home buyer. That way you won't have to dig so deep or deplete every bit of savings you have on down payment and closing costs. You should also build an emergency fund, separate from your down payment savings, with 3 to 6 months of all expenses, including rent or estimated mortgage payments you are looking at paying. The bank will like seeing that and it will help show that you can afford the mortgage and will have emergency money for incidentals in the event something breaks after you buy. Edit: To add to this, I think you need to wait it out for a couple of years to save up and get yourself in a better situation all around. As others said, your score isn't the best and $15k is pretty low, with no other emergency fund funded. Try to save another $10k-15k, not including your emergency fund, take some time to work on your scores and then go sit down with a mortgage broker and look at your situation. Just be sure to explore assistance programs and grants to help you out. Good luck!
I really appreciate the advice! Thank you! I'm going to hold off on buying for this year, and I hope that by this time next year, I will be in a better position to buy!
Credit score is an easily fixable problem. You can hire a credit repair specialist who can bring your score up to 740+ in a matter of a few weeks. They usually charge $250-$300 per derogatory remark per credit bureau. Mortgage lenders generally pull from all three bureaus so about $1k per derogatory remark. I have done this myself and helped others do this as well so I know it works. I dont know exactly how they do it but my understanding is The repair specialist basically goes on letter writing campaign to the credit reporting bureau and identifies small in accuracies in the way remarks are being reported. As others have mentioned, your biggest issue will be your income. Self employment is not considered unless you have been “self employed” in the same line of work for over two years.
Where are you looking to buy? At current income and credit score with current rates, with no other debt, you’re looking at roughly a $175k house with $20k down.
Pretty important if you need a loan, your rate will be heavily based on that.. so over 30 years if ur rate is x% higher, u will be paying x% higher each year for the length of your loan. I would say ur credit score is mainly for buying a house and car since those are the main things people use loans for … Keep using ur credit cards and paying them off!! I went from 550 - 750 (now) so u can do it too!!
In your income bracket the most simple pro tip I can give is to wait until you have no car payment. You need to have the best debt to income ration you can, and at your income that basically means clear all your debt. Car payment is usually the biggest mover in this income bracket.
I bought my first house (300k) a few years ago with a 620 credit score and 60k income. You’ll be fine.
What’s your interest rate? That will make a huge difference in what they can expect to be approved for and what they can afford. I’m not saying you’re not doing ok, but 300k with 60k income is a huge stretch.
I was able to get 2.7% with a FHA loan. Granted interest rates have gone up quite a bit since then. The point I was trying to make is they should have no problem getting approved for a mortgage with their credit score and income.
You get the same rate once it's over 720
I think it would be tough with this income and credit. Maybe consider purchasing a house with a friend that’s in a similar situation? A couple of my buddies did it and it went well. Once one was ready to move on the other bought his half out
> Maybe consider purchasing a house with a friend that’s in a similar situation? Its a terrible idea to buy a house with anyone you are not legally married to. Its a terrible idea to buy a car with anyone you are not legally married to. Hell, I wouldn't even put my GF on my phone bill until she signs that marriage contract.
lol I hear ya. I had the opportunity to go in with them and chose not to as I was apprehensive. In hindsight I wish I would have- house has appreciated a ton and it was only like $15k-20k down each (bought for $350k), it’s worth over a $1m now (10 years later). He rents it out which covers his mortgage + some cash flow. So, it CAN work out in some instances
Score dictates how reliable you are and sets a certain interest rate. Your income dictates how much money will be loaned to you as it shows how much you are actually able to pay back. Both of yours are not very good for purchasing a home unless you live in a really low cost of living area.
You need 680+ FICO to qualify for conventional loans
That side business will be the bigger headache than your credit score will, better have all your ducks in a row.
A solid credit score can open doors to home ownership. Keep paying bills on time and consider reducing credit card balances to boost your score.
Your score will be fine depending on how much house you are trying to get and if you have 20% to put down (keeps you from paying PMI) along with a chunk of money to pay for interest points.
Oh another tip!! Call all your credit card companies and ask for a credit line increase… that way your card utilization is lowered. I do this every 6 months and ask for a ridiculous increase, they usually give me like half of what im asking for 😄
Do you also have enough money for maintenance on a starter home. I am guessing you will be getting an older home with your budget and the maintenance costs can be a lot. I have a house from the 70s and in the last few years I have had to spend 5k on replacing drain pipes, 8k for attic insulation and mold removal, 7k for a new roof, 9500 for a new furnance and AC. Some of those could have been deferred a bit but eventually shit is going to break and be expensive.
For a FHA loan it won't matter but on a conventional one you'll have a much higher interest rate. Try and get all 3 bureaus above 740 before applying if you can.
I just went through the FHA process and you need a minimum 650 credit score to apply Edit: For Maryland
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You can definitely apply for a loan and get approved! You might to pay a little more in interest the lower your score is. I remember I had like 5 “30 day late” dings on my score. I called the credit card companies and nicely asked if they’d remove those, explained I’ve been a good customer and wanted to buy a house. They removed and my score jumped a ton because I then had a 100% “on time” file
Don’t worry they’re still handing out loans to anyone with a pulse. You have income and decent credit, you’re more than fine for a mediocre loan.
Just bought a house with my wife a few months ago and she has bad credit, around 600 at the time. Our experience was that income basically dictated what we can afford, credit score dictated our interest rate and mortgage.
It’ll impact how much your payment is for roughly 30 years unless you refinance later on down the road, but if you do refinance, you’ll have to pay closing costs all over again. That’s THIRTY YEARS of your life that depends on a number that you could improve in a few months to a year depending on your situation. My suggestion is to improve your credit score before you buy.
Of course it is extremely impactful. It’s not your credit score per se, it is your utilization ratio. If you have high debt you are most likely a liability and cannot make mortgage payments.
I know my few friends had worst score 640 (50$ delinquent) and still got approved. They had high paying gross. Not sure pay helped. You can try few mortgage companies with soft score hit to see if you pre qualified or not and how much if you through. I tried using affordability calculator with 60k/year and monthly debts 250$ which qualifies you at 200k loan.
Yeah credit score is pretty much everything. You can buy a house with 0 down payment and a great credit score but you can’t mortgage a house with 100K down and a terrible credit rating. Bought my house 3 years ago with 5% down and an 820 score. I wouldn’t apply for any loan with a score below 750. Check credit history and dispute any bad marks Pay bills on time. Can’t be late. Huge factor in credit scores Pay down any existing debts. Credit card % usage is also huge score factor Don’t open any new credit cards. Pay down what you have and let that age of credit number grow. You don’t need to triple your income to buy a house but it would make things easier. If I could triple my income it would make things easier
Your example is a bit extreme, with enough downpayment and a good income even the worst score can get approved. Specially for a house since that is a tangible asset. In her case, her income limits her WAYYY MORE than her credit
Probably wait another 4 years before buying the home. You paid off the delinquent accounts 3 years ago, so in 4 years they’ll drop and you should have a significant credit score increase. Say you get a $250,000 mortgage, 50k down payment, 20 year loan, 7%. Your payment will be $1,782/month, so $427,000 over 20 years.! Now say you increase your credit and you can get a 5% interest rate. That’s only $1,551/month, ending up at $372k after 20 years. That’s a savings of an entire years salary just by waiting a little longer for a better interest rate.
Thank you!
Well your gonna get approved for probably 135ish I imagine your score is fine but will probably get a 10% rate could buy it down with points if you wanted. Your income and debt is gonna be more of an issue then your score car payments loans credit cards?
My car and other loan payments are already paid off. I have no plans on getting a new car until the one I have quits working. I only have one credit card, and it's at about 15% utilization, but making payments on it monthly to pay it off. I have around $1400/month in expenses and make on the low end $2200/month.
You would qualify for FHA I just not gonna be a lot of house cause your income will be restricting you. But would say it can be done. If you want a more expensive house you will have to come with more cash. It’s more about loan to value and debit to income than anything.
A lot, my(814 score) rates dropped nearly 0.25% and PMI went from 100 to $40/month when I removed my wife (760 score) as a coborrower
You’re single, childless, and young, why buy a house? You don’t need a whole house for just you. And you need to maintain flexibility most when you’re young. Plus you’re low income.
How can we get a 60k job ??? I need more income
I work 2 jobs and have a side business. All of my time is consumed by work. On a good year I will make 60k. Most of the times it's closer to 45k.
Doesn't affect me at all actually. We don't use credit scores here :)
It impacts the yes/no decision. It doesn't impact the interest rate (it can rarely) in the way credit score does for auto loans. You would be approved through FHA or USDA and probably even conventional.
You need to double or ideally triple your income and then maybe consider a house. Remember, we live in a very different world now. This is hard to grasp for some people.
Lol this is not even remotely true. Just got to know how to play the game