Is a 725 credit score good enough to buy a house?
Question: “I think my credit is pretty good, but I don’t really know how to put it into perspective. Is a FICO credit score of 725 good enough to buy a house these days?”
I think what you’re asking is whether or not you can get approved for a mortgage loan with a 725 credit score. Unfortunately, that’s not a question I can answer with certainty, because I’m not a lender. Nor do I know the full extent of your circumstances (your income, debt level, etc.). But I will say this. If you’re doing well in all of the other areas that mortgage lenders look at, a FICO credit score of 725 is certainly good enough to get you approved.
You mentioned one of my favorite words in your question — “perspective.” So let me see if I can help you put this into perspective. Here are some numbers you might want to keep in mind:
- According to Experian (one of the three credit-reporting companies), the average credit score in the United States is around 690 – 695. You are clearly above average, in this regard. Hooray!
- Fannie Mae (an organization that buys loans from mortgage lenders) uses a minimum score of 620 as its cutoff for acceptability. So if a lender wants to sell its loans to this organization, they would have to use that same minimum standard. With a 725 credit score, you are well above this baseline. That’s good news for you.
- Having a FICO 725 will likely help you get approved for a home loan. But you probably won’t be offered the lowest rates that the lender has to offer. To get the best rate, you’d probably need a score of 760 or higher.
- In addition to your credit, the lender will also examine the amount of debt you have, relative to your gross monthly income. And, of course, the size of the loan has a lot to do with whether or not you get approved.
- If you want to get a lower rate on your loan, you can also buy points at closing. This can be a smart strategy for saving money in the long term, especially if you’re going to be in the home for many years (long enough to recoup the upfront costs). More about points
So my final answer is this.Yes, a FICO credit score of 725 is good enough to get a home loan. Generally speaking, of course. The only way to find out where you stand, with certainty, is to apply for a mortgage through a few lenders.
I hope this answers your question, and I wish you well in your house hunting process. If you have more questions about this subject, be sure to do a search at the top of this page. The last time I counted, there were more than 300 articles on this blog. Most of them are credit-related Q&A sessions like this one, so you’ll probably find them helpful.
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- 720 Credit Score – Is it Still a Good Score in 2010?
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- With a credit score of 550, can I get a mortgage loan?
- Do FHA loans depend on your credit score?
