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  • Writer's picturePreston Morris

What should your credit score be to build a house?

Additionally, don't make any large purchases in the months before you're going to apply for a construction loan. Most lenders typically want a minimal credit score of 670 for the loan to be considered, some want the score to be 720 or better.

How big of a loan can I get with a 670 credit score?

Lenders will usually offer an FHA loan to someone with a credit score as low as 600, as long as they can put down 10%. With a credit score above 670, you could qualify for a down payment as low as 3.5%.

Can I get a construction loan with a 720 credit score?

To be approved for a construction loan, you will need: Good to excellent credit. To reduce their risk, lenders require borrowers to have a minimum credit score of 670 to qualify for a construction loan. However, some lenders may require a score of at least 720.

Is 660 a good credit score?

A FICO® Score of 660 places you within a population of consumers whose credit may be seen as Fair. Your 660 FICO® Score is lower than the average U.S. credit score. Statistically speaking, 28% of consumers with credit scores in the Fair range are likely to become seriously delinquent in the future.

To win approval for a construction loan, you may need:

  • Good to excellent credit. To reduce their risk, lenders require borrowers to have a credit score of 670 or higher to qualify for a construction loan. That’s just the minimum, as some lenders may require a score of 720 or better. If you’re planning to build a house, consider taking some time to improve your credit score before applying for a construction loan.

  • Enough income to pay off the loan. In addition to having a strong credit history, you should have enough income to cover payments on your current debts and the new construction loan. To confirm this, your lender will ask for financial statements or other documentation demonstrating your annual income.

  • A low debt-to-income ratio. A borrower’s debt-to-income (DTI) ratio is a comparison of all of your monthly debt payments to your gross monthly income. The lower your DTI, the more cash you theoretically have to make construction loan payments each month. To increase the likelihood that borrowers will be able to make payments, lenders typically require a DTI ratio of no higher than 45% when issuing construction loans.”

What Other Factors Do Mortgage Lenders Consider?

A good credit score alone will not make you a lock for a home loan. Yes, lenders consider credit when you apply for a mortgage but also take into account your:

  • Employment history and income.

  • Down payment.

  • Tax returns for the last two years.

  • Savings and investment accounts.

  • Profit and loss, if you own a business.

  • Debt-to-income ratio, a measurement of how much of your income goes toward paying off debt each month.

  • Negative credit history, including delinquencies, charge-offs or bankruptcies.

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