01 Sep 2018

Credit Score & The Path To Home-ownership

It’s easy when you’re young to just not worry about credit. It’s some made up number created by ghostly corporations that have little to do with you. You shouldn’t ever really feel like you have to grow up, but creating and maintaining an excellent credit score is definitely one of the “grown-up” things that should be taken seriously.

Why you may ask? 

Because if you ever want to accomplish that most kingly of tasks, owning your own home, then your credit gets relevant in a hurry.

There are two big questions regarding mortgages:

1: What credit score do I need to qualify for a mortgage

2: What credit score do I need to get the best possible rate on that mortgage.

When qualifying (or pre-qualifying) for a mortgage, it must be said that there are a lot of factors that go into it. Debt-income ratio and income level are two of the biggest, but it is your credit score that will mean the difference in literally thousands of dollars over the course of the loan.

The minimum credit score to qualify for a mortgage is generally considered to be at least 620. Below this score, it gets very difficult to buy a home. There are sub-prime options, but with the changes in the credit market over the last few years, sub-prime lending has become nearly impossible to obtain.

Before the recession beginning in 2008, a 720 score would get you the best possible mortgage rate. Now that number hovers at or above 760. This is what classifies your credit as elite and qualifies you for the most premium rates.

For an example with today’s rates on a $300,000 loan:

With a score of 620-639, your rate would be 5.4%, leading to a monthly payment of $1,686.

With a score of 760-850, your rate would be 3.8%, leading to a monthly payment of $1,401.

The difference is $285 in monthly payments, which over a 30-year mortgage would add up to $102,000 in interest.

That’s over 100k. What could you do with 100k? Pay for your kids’ college, have a higher quality of life, take that vacation to Bora Bora and witness the salty blue sea next to a paradise beach, a few times over? Surely you can think of many more personally important things.


The bottom line is: a credit score of 620 will get you a mortgage. A credit score of 760 and above will get you into the mortgage of your dreams.