Buying a home is often the biggest financial step most people take—and your credit score plays a huge role in how smooth that step is. According to reports, the average FICO score in the U.S. is 718 as of 2024, but many lenders still expect buyers to have at least a 620 to qualify for conventional financing. The difference between a fair score and an excellent one can mean tens of thousands of dollars over the life of a loan.
That’s why understanding credit scores in home buying is essential before entering the real estate market. So, let’s learn more about this.
Why Credit Scores Matter to Lenders
Credit scores are lenders’ way of assessing risk. A higher score signals that you’ve managed debt responsibly, making you less risky to lend to. That translates into better loan approvals, lower interest rates, and more flexible terms. For example, a buyer with a score of 760 or higher may qualify for a 30-year fixed mortgage at a significantly lower rate than someone with a score of 640. Even a 1% difference in interest can add up to over $30,000 on a $300,000 loan.
How Scores Affect Loan Terms and Affordability
Beyond just approval, your credit score shapes the monthly payment you’ll face. Lower scores often mean higher down payment requirements, higher mortgage insurance premiums, and stricter lending conditions. For buyers aiming to compete in today’s real estate market, a stronger score boosts purchasing power and overall affordability.
Tips to Improve Your Score Before Buying
If you’re planning to buy within the next year, improving your credit score should be a priority. A few practical steps include:
- Pay bills on time: Even one missed payment can drop your score significantly.
- Reduce credit card balances: Aim to keep credit utilization under 30%.
- Avoid opening new accounts: Multiple hard inquiries can temporarily lower your score.
- Check for errors: According to the FTC, 5% people’s credit reports contain mistakes that can hurt their score and, in turn, loan approvals. Disputing errors may improve your rating.
Working with an experienced realtor and a trusted lender can help you understand how your credit profile impacts your home-buying options.
The Role of a Realtor
A local real estate agent in Camp Hill PA in doesn’t control your credit score, but they can guide you toward lenders who work with buyers at different levels of credit. They can also help set realistic expectations about what homes may be affordable given your financing terms. That support makes the buying process less stressful and more efficient.
Consult Experienced Realtors From Smith Top Team Realtors
Ready to buy but unsure how your credit scores affect home home-buying process? At Smith Top Team Realtors, we offer clear guidance every step of the way. As award-winning real estate professionals, we’ve helped clients across Central Pennsylvania in Camp Hill, Harrisburg, Palmyra, York Haven, Marysville, Dover, Carlisle, Duncannon, Enola, and other areas succeed in today’s real estate market. Contact us today to discuss your goals and start planning your path to homeownership.
