🏦 What Is a Credit Score in Real Estate?

A credit score is a three-digit number that measures your creditworthiness and helps mortgage lenders determine your ability to repay a home loan. In real estate, your credit score directly affects loan approval, interest rates, required down payment, and overall affordability.

How a Credit Score Works

Your credit score is calculated using information from your credit report, including payment history, debt levels, credit mix, and length of credit history. Mortgage lenders rely on this score to assess risk and determine the terms of your loan.

Most mortgage lenders use the FICO scoring model, which ranges from 300–850:

  • 300–579: Poor credit
  • 580–669: Fair credit
  • 670–739: Good credit
  • 740–799: Very good credit
  • 800–850: Exceptional credit

Your credit score affects:

  • Loan approval — whether you qualify
  • Interest rate — higher credit = lower rates
  • Down payment — some loan programs require higher credit for minimum down payments
  • Mortgage insurance costs
  • Overall monthly mortgage payment

Lenders use credit scores during mortgage pre-approval and underwriting to verify buyer strength.

Why Credit Scores Matter in Real Estate

For Buyers:

  • Higher credit scores lead to better interest rates
  • Lower monthly payments over the life of the loan
  • More loan options (FHA, VA, conventional)
  • Stronger negotiating power when making an offer

Typical minimum credit score requirements:

  • FHA Loans: Often 580 for 3.5% down
  • Conventional Loans: Usually 620+
  • VA Loans: No official minimum, many lenders prefer 600+
  • Jumbo Loans: Typically 680–700+

For Sellers:

  • Ensures buyers are financially stable and likely to close
  • Reduces fall-through risk during underwriting
  • Helps evaluate the strength of competing offers
  • Supports decision-making during negotiations and concessions

Example of How Credit Scores Affect Home Buying

Two buyers apply for a $400,000 mortgage. Buyer A has a 760 credit score, and Buyer B has a 620 credit score. Buyer A receives a much lower interest rate, saving tens of thousands of dollars in interest over the life of the loan. Buyer B may have higher PMI costs and stricter approval requirements.

Why Credit Scores Matter for FSBO Sellers

Sellers who list FSBO should understand a buyer’s credit strength to avoid failed escrows and delays.

  • Helps confirm buyer eligibility before accepting an offer
  • Supports evaluating pre-approval letters and lender credibility
  • Reduces the risk of financing contingencies falling through
  • Improves confidence in closing timelines

Listing with Flat Fee MLS gives sellers maximum buyer exposure while staying in control of the financing process.

🔗 Related Resources for Buyers & Sellers

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