Credit Scores and Custom Homes
How to navigate the murky waters of credit scores and qualify for the custom home you’ve always wanted.
Credit scores - and home financing - are anything but straightforward. There’s nothing more frustrating than beginning the home building process, only to encounter a curveball with the loan. Mortgage expert Nancy Rosenfeld of McLean Mortgage Company (Atmos Preferred Lender) sets a few key facts straight.
What is the minimum credit score for a home construction loan?
To qualify for a home construction loan, you need a credit score of at least 680. There are a few nuances to be aware of with the credit check process to ensure you’ve got a full view of your credit score, which isn’t always as thoroughly reflected through sites like Credit Karma.
What’s the process of the credit check like?
All home loans require a full credit pull, which will appear as a hard inquiry on your credit. As much as people shy away from that, it’s the only way lenders can accurately qualify buyers for a home loan.
With that hard pull, credit scores often show up lower than what people might see on a site like Credit Karma, which is based off of the scores from credit card companies.
A mortgage company’s risk category is very different from a credit card company’s, which is why those scores can appear lower. We’ve seen scores fluctuate anywhere from 10 to 40 points’ difference, so it’s important not to assume anything about your credit score based on any one site.
There’s no specific formula for finding your mortgage credit score before a lender performs that hard pull, because it all depends on the amounts and types of loans on your credit as well as the length of time accounts have been established. Car loans calculate differently from credit card debt, for example.
How can hopeful homebuyers best prepare for pre-approval?
It may sound cliche, but everyone truly is different. Based on every type of loan history and the whole picture of the financial situation, everyone will need to take different steps to best prepare.
You can work with a lender to understand your credit and get a hard pull done so you have an accurate view of where you stand. While it may seem helpful to get a hard pull yourself, bureaus will only report retail scores to consumers; what we’re looking for are mortgage scores specifically. We have a credit analysis tool and can give suggestions, but it’s important to keep in mind that lenders aren’t the same as credit repair companies and we can’t guarantee results.
Overall, the most important thing to do is to get pre-approved before starting any other part of the process. Getting that clear view will allow you to prioritize and make decisions with all the important information you need!
The custom home of your dreams is right around the corner! Start the pre-approval process with one of our trusted lenders.
