American consumers still have a lot of misconceptions about how the home loan process works. This has become a big barrier for potential home owners.
A recent Fannie Mae study revealed that most believe it is more difficult to qualify for a home loan than it actually is. There are a variety of things the average home buyer thinks is a larger hurdle than they are, but chief among them are credit scores. According to the study, which involved over 3,000 people, the various misconceptions about credit scores included:
- Half of the people didn’t know what the minimum credit score requirements were.
- 14 percent believed 680 or higher was the requirement.
- 32 percent figured they needed a score higher than 620.
First and foremost, the minimum credit score, generally, is 550. Additionally, home buyers in Fort Collins should be aware that the credit score range is between 300 and 850. As a general rule of thumb, here is how scores are rated:
- 800+ – Exceptional
- 740-799 – Very Good
- 670-739 – Good
- 580-669 – Fair
- < 580 – Poor
And what is truly important is for buyers to know is that there are home loan programs available that don’t require a “Good” or higher credit score.
Specifically, FHA Loans are insured by the Federal Housing Administration, which allows this program to offer flexible requirement guidelines, such as lower down payments and credit score minimums.
At Element Mortgage, we put a priority on educating home buyers so they can go through the home loan process and purchase real estate with confidence. That is why we make sure we help alleviate some of the myths out there when it comes to credit scores. The fact is, a less-than-stellar credit score may not prevent you from purchasing a home. And if you would like to improve your credit score, we have tips on how to do that as well!
If you would like any guidance on credit scores, don’t hesitate to contact one of our mortgage consultants, who will take the time to get to know you and your goals.