Helpful Home Tips &
Mortgage Advice from Experts

Credit scores are not the only factor considered for mortgages,but a good credit score can greatly improve your chances of approval.

Credit Scores and Mortgage Requirements

Although people typically refer to their “credit score,” you actually have more than one. Equifax, TransUnion, and Experian are the main credit reporting agencies. Lenders typically pull all three, then use the middle one as your score. The higher your score, the better your interest rate will be.

A credit score over 760 will get you the best interest rates with a traditional loan. However, you can still qualify for a FHA mortgage with a credit score of just 580. At NLC Loans, VA loans have the same score requirement.

A lower score and higher interest rate means you’ll pay more over the life of the loan. It also means higher monthly payments.

Credit Scores Explained

Your credit score is calculated based on these factors:

• Payment history: 35%
• Amount of money owed: 30%
• Length of credit history: 15%
• New credit accounts: 10%
• Types of credit: 10%

Beyond Credit Scores

Your credit score is just one of the deciding factors lenders use to approve a mortgage. They also look at:

Debt to income ratio (DTI): This number is the percentage of your monthly income that goes towards paying your various debts. The higher the number, the more overextended you are. A DTI over 43% will disqualify most people from a traditional mortgage. You can keep your DTI low by paying down debt and avoiding opening up new lines of credit.

Job history. A steady job history is a good indication to lenders that you will be able to make your mortgage payment on time.

Assets. Money in the bank, retirement accounts, and an emergency fund are also important to lenders and indicate you aren’t living paycheck to paycheck.

If you want to buy a home, a good credit score certainly helps. However, it’s not the only factor. If your credit score is low, work to improve it by making payments on time, paying down debt, and paying off collection accounts. As you do this, you’ll find that your financial health—and eligibility for a mortgage—will also improve. For more information on home ownership with challenged credit, contact one of NLC Loans’ personal mortgage advisors toll-free at 866-480-8050.