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Credit 101: What Credit Score Is Needed to Buy a House?

What credit score is needed to buy a house?

That might just be the most popular question we hear customers ask. Credit score is a huge part of the mortgage process, and while it’s not the sole deciding factor, it can make or break some deals.

Luckily, there are some general guidelines we can lay out for you about what kind of credit score is needed to buy a house that you’ll love calling home.

So let’s dive into the world of credit scores and help you have a better idea of where you’re at in the home buying process.

Minimum Scores

Depending on the type of loan you choose, you may end up with different requirements for a credit score. South Africans have access to the following types of loans:

  • Variable Home Loan
  • Capped Rate Home Loan
  • First Time Buyers Home Loan
  • Fixed-Rate Home Loan
  • Step Down Home Loan

Variable Home Loan

For most any mortgage in South Africa, you’ll need a minimum of a 490 credit score. A variable home loan is often regarded as a normal loan in South Africa. As its name implies, the rates go up and down according to the base rate.

Capped Rate Home Loan

This is a loan that requires meeting strict criteria, and they’re not readily available. When they are, though, you have the opportunity to set a maximum interest rate that your loan will never cross.

First Time Buyers Home Loan

With this loan, you’re able to borrow more than 100% of the purchase price of your home. This means you can finance the entirety of the home, including any of the registration and transfer costs.

Fixed-Rate Home Loan

Despite its name, a fixed-rate loan doesn’t stay fixed forever. Usually, a fixed rate stays locked in for a couple of years. After that, the rate varies according to the base home rate.

Step Down Home Loan

With step down home loans, the loan originator and the borrowers agree upon a gradual step down in interest rates every six months for a certain period of time. This helps you avoid paying higher interest if the base home rate rises during this time.

Improve your Score

If you’re not quite at the level you need to be in order for the loan that you think will be best for you, don’t worry. Contrary to what you may feel, there are a lot of ways to help improve your credit score.

Where most people start is by paying the oldest, past-due accounts first. You’ll want to order these in order of lowest to highest balance.

Then, work to pay off that low balance first. You’ll end up with a “snowball” effect of paying off debt, relieving that burden in no time.

The other thing you can do is to take a class that goes into detail on the mortgage process. This will help you identify areas in your finances where you can make changes and increase your credit score.

Find out What Credit Score Is Needed to Buy a House

Navigating the world of mortgages and loans is confusing at times, but with the right people on your side, you’ll have it taken care of in no time.

We hope we’ve answered the question of what credit score is needed to buy a house, based on the loan you want. If you need more information, please feel free to reach out to us at any time.