If you’re planning to purchase a home in West Palm Beach, one of the key factors in getting a mortgage is your credit score.
Your credit score serves as a metric to determine how lenders rate you as a borrower. It’s evidence that you are able to pay your outstanding bills on time and repay your loans. Your credit history combined with a good credit score assures lenders that you’ll be able to repay the loan on time.
This is why many lenders set minimum required credit scores for the loans they’re offering. For homebuyers, this minimum score varies depending on the type of loan you’re after.
Keep in mind that every lender is different, so knowing how your current credit score stacks up and how it affects your loan application will be key.
On this page, we’ll take a look at the minimum credit score you’ll need to buy a home in West Palm Beach, what you can do your credit score, and other helpful information.
What is a good credit score to purchase a home?
In general, a credit score of at least 620 is required to secure a home loan. This is the minimum score required by most lenders for a conventional loan.
However, it’s still possible to get a loan even if you have a score lower than 620. With government-backed mortgages such as Federal Housing Administration or FHA loans, there are lower credit requirements compared to adjustable-rate mortgages and conventional fixed-rate loans.
Advantages of getting an FHA loan
FHA loans offer many advantages for Florida homebuyers, especially those who are unable to make a large down payment on a home. Back in 2020, the FHA issued more than 1.3 million home mortgage loans.
FHA loans are very ideal for first-time homebuyers as they’re more accessible, mainly because they have lower requirements than conventional loans. However, FHA loans still have loan limits, which will impact the sum of money you can borrow.
One factor that influences FHA loan limits is housing types. There are lower FHA loan limits in neighborhoods and communities that have lower costs of living, and higher loan amounts in counties with higher costs of living.
When planning your budget around an FHA loan, you need to get information on the FHA limits for your county. For prospective buyers in West Palm Beach, current Palm Beach County FHA loans range from $460K for one living-unit homes to $884.6K for four living units.
To find out whether a specific home qualifies for an FHA loan, the property will need to be appraised by an approved FHA appraiser. You can visit this page to find a list of FHA-approved appraisers located in Palm Beach County.
FHA programs also come with income limits. Prospective homebuyers with incomes exceeding the income limit will be unable to qualify for an FHA loan. FHA loans do not contain a minimum income requirement.
The FHA program requires verifiable proof of income together with at least two established credit accounts, such as a credit card or car loan. Any proof of online transactions and pay stubs will help verify income.
Quick tips on improving your credit score
Taking steps to improve your credit score is a must when you’re seriously considering homeownership. Here are several helpful tips to keep in mind:
- Avoid missing payments – Your payment history is among the most important factors in determining your credit score. Having a history of consistently making payments on time will make you achieve higher credit scores. You can do this by making sure to avoid missing credit card or loan payments by more than 29 days. Payments that are late by at least 30 days are reported to credit bureaus, which can negatively impact your credit score.
- Maintain a low balance on revolving accounts – Even if you manage to consistently pay your bills on time, having revolving credit accounts with a high balance can lead to a high credit utilization rate, which hurts your credit score. It’s a smart move to maintain a low balance on these accounts relative to their credit limits to help improve your score.
- Build your credit file – Having a good track record as a borrower requires you to have at least some active credit accounts that will be reported to major credit bureaus. In case you’re just starting out or trying to improve a low score, you can go with secured cards or credit-builder loans. But if you’re looking to improve an already established score, a rewards credit card is a better option.
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