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What fica score is needed for a loan?
Anyone can get a loan with any FICA credit score. The difference is the amount of down payment required and the interest rate the borrower will pay. The preferred groups for home loans have a score of 720 or above. FHA will consider scores as low as 620 with a heavy focus on the last two years of the credit history.
The FICA credit score computes the borrower’s financial history. It takes into consideration the payment history of this borrower, credit utilization which is the amount of money owed on the credit cards versus the credit card limits, the length of credit history, the types of credit used which are installment, revolving and consumer finance and recent searches for credit. This score is used to predict the percentage of people who will not make their payments in each score range.
When purchasing a home, the fica score needed for a loan is 620 or higher. Borrowers with 720 and above are given preferred treatment and very favorable interest. This score is rated as an excellent score. Ratings between 680 and 699 are called good and have low interest. 620 to 679 numbers are rated okay and they have a reasonable interest rate. The higher your FICA score is, the lower the required down payment will be. FHA requires only a 5% down payment. Most conventional lenders require 10% down for an excellent rating and 20% for borrowers with a score under 700.
Borrowers with lower scores are still able to get loans. These borrowers would need 50% or more of the purchase price and the interest rate will be high.
With careful shopping almost any borrower can find a loan. This credit score dictates the amount of money needed to put down as a payment and the interest the borrower will be paying. High scores mean better terms and a wider range of choices.
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