What is the desired credit score needed to have a house?

The desire to have your own home is in the hearts of many, and most of them look to fulfil this desire by availing a home loan. However, only a few of them succeed in their efforts to avail a home loan for their dream house. The reason behind most people’s failure to get a home loan is not because they do have selected a bad property or do not have enough income to pay the EMI. The real reason is their unawareness about when to apply for it and how to know the right time. One of the crucial aspects about knowing when is the right time to apply is to be aware of your credit score. Now, it has become very easy, we can undergo a check credit score online for free.

Lenders give great importance to credit score. For a simple reason, that credit score is a reflection of an individual’s creditworthiness. It gives the bank a track record of how you have handled your previous credits and loans. 

A home loan is the top choice when it comes to credit options for buying a house. However, it is not the only option. In case you are buying a second house, and you have no ongoing loan on the current house then you can mortgage your current house to avail loan against property and use those funds to buy a second house. Alternatively, you can also avail a high ticket personal loan in case you have a significant portion of the required funds and want to cover the remaining fund requirement with a short term loan. 

The credit score is a major eligibility criterion when it comes to the personal loan. It is only because a personal loan is an unsecured loan; therefore, the bank the only assurance and security bank gets is your creditworthiness. Therefore, you need a good credit score (minimum 720) to avail personal loan of high amount. 

In the case of home loans and loans against property, the importance of credit score is less as compared to personal loan because, in the case of these loans, banks also have property mortgaged with them as security. However, they still want their loan repaid; thus, credit score still matters. 

In the case of loan against property, the maximum LTV is 75%, and maximum tenure is 15 years. Both LTV and tenure are lower than a home loan because the mortgaged property is already old and in use. The credit score here plays an important role to get as high LTV as possible. 

In the case of home loan, the LTV is up to 90% and tenure is up to 30 years. This is because the property is new and yet to be used. So the value is high. Here, banks do check credit score, but if the income level and property value is above par, then an average credit score of 620 and above may not be a problem. However, a score below 600 is poor, and banks in most cases would rather choose to advance loans to a new-to-credit person than someone whose score is extremely low. 

Thus, based on the loan type, you choose the importance of credit score does vary. However, what rate of interest you get is something that is primarily decided by the credit score. This means, with an average score you might get the loan but to get a good loan deal on any credit type, you must have a good credit score of 800 and above. 

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