This article is part of a new series, through which we will answer some of the most frequently asked question from California home buyers. This article addresses the question: What credit score is needed to buy a house in California, in 2017?
The short answer is, it depends. Credit scores are only one aspect of the mortgage loan qualification process. Your income, assets and debts also play a role. From a lender’s perspective, the “big picture” matters more than any single component. With that being said, lenders today prefer to see a score of 600 or higher for mortgage approval. But that number is certainly not set in stone.
What Is a Credit Score?
If you’re going to use a mortgage loan to buy a home in California, your credit score will probably come into the picture at some point. It’s part of a broader financial review process, and it can partly determine whether or not you get approved for a loan.
But what is a credit score, exactly?
Definition: Credit scores are three-digit numbers that reflect how a person has borrowed and repaid money in the past. These numbers are computed from information found within a person’s credit reports. There are different types of scoring models. The FICO credit score (which is commonly used by mortgage lenders) ranges from 300 to 850. Higher is better.
If you’ve been responsible with your borrowing in the past, you should have a good score. This will improve your chances of qualifying for a loan. On the other hand, borrowers with credit issues in the past (such as late payments and delinquencies) tend to have lower scores.
These three-digit numbers help mortgage lenders understand how likely a person is to repay a loan obligation. They’re used to evaluate the potential risk posed by lending money to a particular borrower, and to prevent or reduce losses due to borrower default.
What Score Is Needed to Buy a House in California?
There is no single “cutoff” point for credit scores used across the mortgage industry. This is a common misconception. The truth is that different lenders have different standards, business models, and appetites for risk. So the credit score needed to buy a home in California will partly depend on who you’re working with.
Generally speaking — emphasis on the word “generally” — mortgage companies prefer to see a score of 600 or above for loan approval. But this number is not set in stone. It’s just an industry trend. So don’t be discouraged if you fall below this level. Contact us anyway. We will gladly review your financial situation to see if you’re a good candidate for a California home loan.
The type of home loan you use also plays a part here. For instance, Federal Housing Administration (FHA) home loans require a minimum score of 580, if the borrower wants to take advantage of the 3.5% down payment option. Credit score requirements for conventional (non-FHA) mortgage loans tend to be a bit higher, because there is no government insurance.
As mentioned above, lenders tend to look at the big picture when evaluating loan applicants. Every lending scenario is different, because every borrower is different. So a low credit score, by itself, might not necessarily be a deal-breaker. With that being said, a higher credit score will generally improve a borrower’s chances of qualifying for a home loan in California.
Let’s Talk About Your Mortgage Options
Do you plan to buy a house in California sometime soon? Do you need a mortgage loan to help finance your purchase? If so, we can help. Bridgepoint Funding has been serving borrowers in California for more than 15 years. We offer a variety of loan products with flexible qualification criteria. We realize that you’re more than just a number.
Credit scores are important when buying a home in California, but they’re not everything. We will consider your broader financial situation to make an informed decision. You have nothing to lose by having a conversation with us, and plenty to gain. So contact our California home loan experts today with any questions you have!