Essential Insights at a Glance
- Credit scores usually fall between 300 and 850 — the loftier your score, the better your standing.
- Mortgage lenders set varied minimum credit score thresholds; generally, a higher score unlocks sweeter interest rates.
- Consistently settling bills on time and trimming down outstanding debts can push your credit score upwards.
When diving into the world of home financing, grasping what lenders scrutinize in prospective borrowers is key. An indispensable piece of this puzzle is your credit score, which acts as a barometer of your financial reliability: the loftier the score, the more appealing you look to lenders.
Among the leading scoring systems, FICO and VantageScore operate within the familiar band of 300 at the low end to 850 at the top. Ideally, your score edges close to that upper limit. But what happens if your credit score falls just short of that pinnacle? Say, at 700 — does that number open doors to homeownership? Let’s unravel the recommended benchmarks for various mortgage types and pinpoint if a 700 credit score truly makes the cut for buying a house.
What Credit Score Does It Take to Secure a Home Loan?
“Mortgage lenders weigh four heavy hitters when deciding on loans: credit score, income, assets, and payment history,” shares Ralph DiBugnara, senior vice president at Cardinal Financial and founder of Home Qualified. “Out of these, credit score plays the starring role in determining the interest rate you snag, which means it shapes your long-term cost the most.”
While higher scores signal stronger creditworthiness, defining a “good” score is crucial. Most lenders lean on FICO scores, and though VantageScore’s scale slightly varies, both concur: a 700 rating stands solidly in the ‘good’ territory. Here’s a quick snapshot of their grading:
| Excellent/Exceptional | 800–850 | 781–850 |
| Very Good | 740–799 | — |
| Good | 670–739 | 661–780 |
| Fair | 580–669 | 601–660 |
| Poor | 300–579 | 500–600 |
| Very Poor | — | 300–499 |
While a 700 score may not sit at the apex, it certainly doesn’t slam the door on the majority of home loan avenues. DiBugnara confirms, “Borrowers with a score north of 680 can tap into roughly 95 percent of all financing options out there.”
Lenders’ Loan Types Open to Those with a 700 Credit Score
In fact, a FICO score hitting 700 clears the bar for most home financing choices — jumbo loans included, which cater to pricier properties.
Conventional Loans
With typical qualifying marks at 620 for fixed-rate and 640 for adjustable-rate conventional loans, conventional financing isn’t a stretch for a 700 scorer. “To snag better interest rates and terms, aiming for a 700-plus credit score is smart,” advises Rick Gruebele, broker at Visions First Realty in northern Wisconsin.
FHA Loans
Backed by the Federal Housing Administration, FHA loans charm first-time buyers and beyond with lower credit score hurdles. If you can swing a 10% down payment, you need only a 500 score minimum; bumping your score to 580 or above drops that down payment floor to just 3.5%.
VA Loans
Designed for active-duty military, veterans, and their spouses, VA loans don’t impose set credit score minimums. However, lenders usually ask for a 620 or higher to offer favorable terms, notes Gruebele.
USDA Loans
For those eyeing rural homes eligible under USDA programs, a credit score of 640 typically unlocks the door.
Jumbo Loans
When borrowing beyond conventional loan ceilings, jumbo loans enter the picture, usually requiring a minimum credit score of 700, according to Kevin Martini, mortgage advisor at Martini Mortgage Group.
How Does a 700 Score Shape Your Homebuying Budget?
Your credit profile directly influences mortgage rates. For instance, as of mid-August 2023, a 700 credit score might earn an interest rate around 6.796%, translating to a monthly mortgage payment near $1,955. Bump that score up to 760, and you could enjoy the best rate available — approximately 6.574% — where payments dip slightly to $1,911 each month. That seemingly minor $44 monthly difference balloons into over $15,800 in interest savings across 30 years.
At the other end, a 620 score, the bare minimum for many conventional loans, could send monthly payments soaring to $2,235. Thus, a 700 score positions you substantially better in the financial hierarchy of homebuyers.
Tips to Boost Your Credit Score Before Applying
Elevating your credit score before house hunting is a wise strategy, impacting not only loan approval but also the cost of borrowing over time.
- Steer clear of new credit accounts: Frequent credit applications trigger hard inquiries, which can ding your score, especially if clustered closely together, cautions Martini.
- Keep older accounts open: Even if dormant, longstanding credit lines positively affect your credit history length — a key scoring factor, says Gruebele.
- Audit your credit reports: Scrutinize your credit reports for inaccuracies like outdated debts or mistaken missed payments, which DiBugnara highlights as common score saboteurs.
Start integrating these habits at least six months prior to your mortgage application to give your score ample time to reflect improvements.
What Comes Next?
If your credit score falls short of your aspirations, consider partnering with a seasoned real estate agent early on. Tailored guidance can steer you toward homes that align with both your financial landscape and lifestyle preferences.
FAQs
Can I buy a house with a 700 credit score?
Absolutely. Provided your financial footing is stable, a 700 score qualifies you for most major loan programs, including conventional, FHA, VA, USDA, and even jumbo loans.
Is now a good time to buy a house, or should I hold off?
Kevin Martini advises purchasing when your finances are steady and your credit score reflects reliability. Despite high mortgage rates and property prices currently, if you enjoy job security and sufficient savings, moving forward makes sense; otherwise, pausing might be prudent.
How much home can I realistically afford?
Financial experts generally recommend capping monthly housing expenses—covering mortgage, taxes, and insurance—at 28% to 30% of your gross monthly income. To put that in perspective: If you earn $100,000 annually ($8,333 monthly), sticking to around $2,333 for housing costs aligns with this guideline.