Is it true that the higher your credit score, the bigger the chance you won't need any money down?

Question

I'm asking about first time homebuyers. My understanding is: the lower your score, the higher your downpayment. The higher your score, the lower your downpayment. Sometimes as low as zero except for closing costs.

Answer 1

No. The higher your credit score, the better your interest rate and other terms of your mortgage. To clarify FACTS not correct:

1. Your down payment - hopefully will be 20% of the negotiated sales price of the home.
2. So you will need an 80% loan.
3. You will either pay the closing costs in cash, or you will add it to the mortgage.

4. Less than 20% down, means that you will need MANDATORY,
PMI Insurance. This must be paid each month along with your mortgage which is your principal and interest payment.
Then you have to pay your real estate taxes and homeowners insurance with your mortgage, and PMI payment.
This makes your monthly payment much higher.

5. If you have 20% down, the bank, credit union or whatever lender may allow you to pay the real estate taxes and homeowners insurance on your own.
If you don't have 20% down, most will force you to pay it monthly because you are a higher risk for default.

6. So your initial $100,000 mortgage at about 7%, 30 years (only if you have a great credit ration), will cost = $665.30 for your mortgage loan,
plus if you owe about $2,000 per year in yearly, real estate taxes (and this is a very low estimate), plus $400 in home owners insurance = $2,400 per year, that's an extra $200 per month.
Your total monthly payment is $865.30, without your pmi insurance which is mandatory if you don't have the 20% down.

$865.30 plus an estimate of $100PMI - $965.30.

The PMI insurance - goes away once you have the mortgage paid down to the equivalent of 20% down, and you must ask for it to be removed, as nothing is automatic anymore.

7. In summary, the credit score has nothing to do with the downpayment. These are standard banking regulations if you don't have 20% down.

GOD bless us one and all, always.
CPA-retired
MBA-Boston Univ.
I sold real estate working my way through college, and many people did not understand "qualifying for a mortgage", so we prequalified our clients.
Banks and credit unions can help you to "prequalify" for a mortgage before you even begin to look for a home. They can give you an idea what amount you are qualified to borrow, based on your salary, credit history, and credit card and auto debt.

Answer 2

Yes. As a general rule that is correct. It will also assist you in terms of your rate and potentially the amount of money you can borrow. There are an almost indecipherable number of loan programs out there.

The more practical question is how much money should you put down? If you are buying a house, you should have saved some money up to do so period (IMHO). This is a large step and a huge commitment. While you can get in for little or no money down, it is not necessarily the best thing to do in all cases.

Consult your local mortgage broker. I would call several and meet with each of them. Preferably someone will refer you to a friend who is a broker. They can offer you a wide array of programs.

In the US, I know for a fact you do not have to pay for PMI per se. What you will do if you want zero down is pay a higher rate than if you put 10 or 20% down. 20% down is what most people refer to as a conforming loan and that is where your best rates can be found.

Best of luck in your search.

Regards,

Joe...

Answer 3

Not necessarily the lower the down payment, just that most lenders are not willing to loan 100% of the purchase price to someone that's considered a high risk. If you have a higher credit score they feel better about the risk they're taking.

Some lenders require a score of 650 or better for 100% financing, some require only 580 but will charge a horrible interest rate. So it's not that you pay a smaller down payment with better credit, you just have to have a certain score in order to even have that option.

If you qualify for a VA loan they don't require a down payment, FYI.

Answer 4

yes, you can get 0 down with fair to good credit. As long as your score(s) are atleast 580 you can get 0 down-- but the higher the score, the better the rate.

You can get 0 down AND write into the purchase & sale agreement that the seller pays your cost- so you're actually buying a house for no out of pocket expenses.

Answer 5

Your credit score factors in, but so does a lot of other things. It's a risk factor. Are you more of a risk given your score. Have you tried FHA or VA? If you are seeking little to no down payment they may be your best bet.

Answer 6

NOOOOOO....... Your credit score (higher the better)reflexs on your timely payments to creditors..Like credit cards and loans for cars and so forth..Even not paying your rent,(having a judgment against you) can be reflexed on your credit history..(The landlord has to file the judgement as I did recently)...The score you recieve helps loan people decide if your worthy of the type of money your asking to borrow,the better your score will help with getting lower interest rates..even car insurance rates is based on your credit score..No joke ask!...So pay your bills on time ,and you'll enjoy the ability to borrow at the lower interest rates avalible..

Answer 7

Your credit score factors in, but so does a lot of other things. It's a risk factor. Are you more of a risk given your score. Have you tried FHA or VA? If you are seeking little to no down payment they may be your best bet.

Answer 8

yes

Answer 9

yes i think so