What Credit Score Do You Need to Buy a House?
Financial terms are confusing to most people because concepts and perspectives change constantly. Credit scores are a tool to measure the financial status of a person. It can analyze and suggest specific changes, be it repayment status, credit mix, or debt agreement.
Financial institutions or banks share the credit data of users to track their credit scores and ensure the smooth distribution of loans to borrowers. Additionally, a mortgage is an essential factor when taking a house loan. Along with this, it is crucial to check your credit score.
Yes! It’s important to always check your score before opting for a loan. You can check your free cibil score check via the CIBIL score app or the credit portal after you have completed registration.
In this article, we will discuss the ideal credit score to buy a house and certain helpful tips to increase your credit score.
Ideal Credit Score to Buy a House
The ideal credit score for buying a house is between 600 and 750, but lenders have different preferences. When a borrower’s score falls below 600, the chances of getting a loan are low.
Banks classify defaulters as those with scores below 500 according to their standards. Having a 700 or higher score is preferable because it might enable you to put down less money, receive an enticing interest rate, and avoid paying for high mortgages.
It is crucial to check your CIBIL score to ensure your eligibility and work on the factors affecting its growth. You can check the CIBIL score for free on the CIBIL score app.
There are various credit limits based on loan types:
- The government does not guarantee conventional loans. Conventional loans preferred a credit limit of 620 or higher. A below 600 credit score has a high-risk potentiality for this type of loan.
- FHA loans are suitable for those who have low credit scores. A credit rate above 500 can go for an FHA loan without hassle.
- Government-owned VA Loan is ideal for veterans, active-duty personnel and First-time buyers. It has a low-interest rate.
How to Get a Home Loan Despite a Bad Credit Profile?
Despite having a bad credit score, it is possible to get a home loan:
- Build Good Rapport with Bank: The bank having your savings account or recurring account should have a positive rapport. It increases your chances of getting a loan despite a bad credit score. Commercial banks grant loans to people who have a positive relationship with them. Your creditworthiness is a secondary factor with commercial banks.
- Strong Spouse profile: You can get a home loan if your spouse’s credit score is good. You can add your spouse as the principal applicant and keep yourself as a co-applicant.
- Affordable Housing: Some banks charge high-interest rates but offer affordable home loans. You must compare the different bank rates and plan your loan lending institution accordingly.
- Additional Collateral: If you have two properties and are trying to take on more properties. You can add other collateral, pay EMIs in the future, and compensate for the payment of the additional collateral.
- Take Guarantor: You can bring your guarantor to sign your application and get a loan.
Tips and Benefits to Improve Credit Score
Below mentioned are specific tips and benefits for improving your credit score. These are:
Tips
- Pay your Loans in time: Paying your debts on time keeps your credit score high, and you can take a loan without having a second thought.
- Check your score: Always check your score before opting for a loan. You can check your CIBIL score for free via the CIBIL score app or the credit portal after you have completed registration.
- Avoid multiple inquiries to get a better credit score.
- Only apply for one credit card. Try using the existing one.
- Maintain a regular check on your credit report.
Benefits
- Increase credit limits
- Better Bargaining Power
- It gives reasonable interest rates to borrowers.
- Access to Discounts
- Access to credit cards
Conclusion
These days, home loans are popular. Everyone is driven to buy a house. A significant factor in determining your eligibility is your credit score. A CIBIL score app makes it simple to check your credit score for free. A CIBIL score varies based on loan type. A score above 720 is what one should be aiming for before opting for house loans. However, certain factors like a strong spouse profile, rapport history, and NOC can help you get a loan. Some perks of having a good credit score are higher credit limits, Bargaining power, access to credit cards etc. One should make decisions wisely before choosing a loan.
