Can I buy a house with a 708 credit score?

So, you're dreaming of owning your own home, and the big question on your mind is: "Can I buy a house with a 708 credit score?" The good news is that a 708 credit score falls within the "good" credit score range. This means you're definitely in a position where homeownership is attainable. However, there's more to the story than just the number itself. Let's dive into what a 708 credit score means for your home-buying journey.

Understanding Your 708 Credit Score

A FICO score, the most commonly used credit scoring model, ranges from 300 to 850. A score of 708 places you in a solid position. Here's a general breakdown:

• Excellent: 800+
• Very Good: 740-799
• Good: 670-739
• Fair: 580-669
• Poor: Below 580

As you can see, your 708 score is comfortably in the "good" range, opening doors to various mortgage options. Lenders view borrowers with good credit scores as lower risk, which can translate to better interest rates and loan terms.

Factors Influencing Your Mortgage Approval Beyond Your Credit Score

While a 708 credit score is a significant asset, lenders evaluate more than just that single number. They'll also consider these factors:

• Debt-to-Income Ratio (DTI): This is the percentage of your gross monthly income that goes towards paying debts. Lenders prefer a lower DTI, typically below 43%. Calculate your DTI by dividing your total monthly debt payments by your gross monthly income.
• Down Payment: The amount of money you put down on the home. A larger down payment often leads to better loan terms and can even eliminate the need for private mortgage insurance (PMI) on conventional loans.
• Employment History: Lenders want to see a stable employment history, typically two years or more with the same employer or within the same industry.
• Assets: Savings, investments, and other assets demonstrate your financial stability and ability to handle unexpected expenses.
• Property Appraisal: The lender will order an appraisal to determine the fair market value of the home. The loan amount cannot exceed the appraised value.

Mortgage Options Available with a 708 Credit Score

With a 708 credit score, you have a good chance of qualifying for several types of mortgages:

Conventional Loans

Conventional loans are not backed by a government agency. They typically require a higher credit score (often 620 or higher) and a down payment of at least 3%. A 708 score significantly increases your chances of approval and potentially unlocks more favorable interest rates. If your down payment is less than 20%, you'll likely need to pay private mortgage insurance (PMI).

FHA Loans

FHA loans are insured by the Federal Housing Administration, making them a popular option for first-time homebuyers. They have more lenient credit score requirements (often as low as 500 in some cases), but a 708 score will position you for even better rates and terms. FHA loans require mortgage insurance, both upfront (UFMIP) and annually. A lower credit score often results in a higher mortgage insurance premium, so your 708 score works in your favor.

VA Loans

VA loans are guaranteed by the Department of Veterans Affairs and are available to eligible veterans, active-duty military personnel, and surviving spouses. VA loans often don't require a down payment and typically have lower interest rates than conventional loans. While the VA doesn't set a minimum credit score, lenders typically look for a score of 620 or higher. Your 708 credit score easily meets this requirement.

USDA Loans

USDA loans are offered by the U.S. Department of Agriculture and are designed to help low-to-moderate-income homebuyers purchase homes in rural areas. While USDA loans don't have a specific credit score requirement, lenders typically look for a score of 640 or higher. A 708 score puts you in a strong position to qualify if you meet the other eligibility criteria.

How Your 708 Credit Score Impacts Interest Rates

One of the most significant advantages of having a good credit score like 708 is the potential for lower interest rates. Even a small difference in interest rates can save you thousands of dollars over the life of the loan.

Lenders use your credit score to assess the risk of lending you money. A higher score indicates a lower risk of default, which translates to a lower interest rate. A lower interest rate means lower monthly payments and less interest paid over time.

To get a sense of current interest rates, it's a good idea to check online mortgage rate comparison tools and speak with several lenders. Be sure to compare annual percentage rates (APRs), which include not only the interest rate but also other fees associated with the loan.

Tips for Buying a House with a 708 Credit Score

While a 708 credit score is a great starting point, here are some additional tips to increase your chances of getting approved for a mortgage and securing the best possible terms:

• Review Your Credit Report: Before applying for a mortgage, check your credit reports from all three major credit bureaus (Equifax, Experian, and TransUnion). Look for any errors or inaccuracies that could be negatively impacting your score. Dispute any errors you find.
• Reduce Your Debt-to-Income Ratio (DTI): Pay down existing debt, especially high-interest debt like credit card balances, to lower your DTI. This will demonstrate to lenders that you have the capacity to handle a mortgage payment.
• Save for a Larger Down Payment: The more you can put down, the lower your loan amount will be, and the less risk you pose to the lender. A larger down payment can also help you avoid PMI on conventional loans.
• Get Pre-Approved for a Mortgage: Getting pre-approved for a mortgage gives you a clear idea of how much you can borrow and strengthens your offer when you find a home you want to buy.
• Shop Around for the Best Mortgage Rates: Don't settle for the first offer you receive. Compare rates and terms from multiple lenders to find the best deal.
• Avoid Opening New Credit Accounts: Opening new credit accounts before applying for a mortgage can lower your credit score and negatively impact your approval chances.
• Maintain Consistent Payment History: Continue making all your debt payments on time and in full. A consistent payment history is a key factor in maintaining a good credit score.

Building on Your 708 Credit Score

Even though 708 is a solid "good" score, striving for "very good" or "excellent" will only improve your access to the best rates and terms. Consider these strategies to push your score higher:

• Credit Utilization Ratio: Aim to keep your credit card balances below 30% of your credit limit. Ideally, keep it below 10%.
• Long Credit History: The length of your credit history is a factor in your score. The longer you've had credit accounts open and in good standing, the better.
• Diversify Credit Mix: Having a mix of different types of credit (credit cards, installment loans, etc.) can positively impact your score.

Alternatives if You're Not Quite Ready

If, after assessing your situation, you feel you aren't quite ready to buy, consider these alternatives:

• Rent and Save: Continue renting while focusing on improving your credit score and saving for a larger down payment.
• Homebuyer Education Courses: Take a homebuyer education course to learn about the home-buying process, budgeting, and financial management.
• Consult with a Financial Advisor: A financial advisor can help you create a plan to improve your finances and achieve your homeownership goals.