Can I Buy a House With a 713 Credit Score?

It is possible to purchase a home with a 713 credit score, which generally indicates a responsible financial history. However, securing a mortgage involves a comprehensive evaluation of an applicant’s financial health, extending beyond just the credit score. Lenders consider various factors to assess a borrower’s capacity to repay a loan and the overall risk involved. This article explains how a 713 credit score influences mortgage eligibility and outlines the financial considerations and steps involved in homebuying.

Understanding Your 713 Credit Score’s Impact

A 713 credit score is generally considered “Good” or even “Very Good” by common scoring models such as FICO and VantageScore. For FICO scores, which most lenders use, a score between 670 and 739 falls into the “Good” category. VantageScore models classify scores between 661 and 780 as “Good” or “Prime.” This score indicates a lower risk profile to lenders compared to those with lower scores, demonstrating a history of responsible credit management.

While a 713 score positions a borrower favorably for mortgage eligibility, it does not automatically guarantee the absolute lowest interest rates. Lenders often reserve the most competitive rates for those with “Very Good” or “Exceptional” scores, typically above 740 or even 800. Nevertheless, a score in this range significantly broadens the range of available mortgage products and terms, offering more favorable conditions than if your score were lower.

Essential Financial Considerations for Lenders

Beyond your credit score, lenders delve into several other financial aspects to determine loan eligibility and terms. These factors provide a more complete picture of your financial stability and ability to manage a mortgage.

Income stability and verification are paramount for lenders. They need assurance that you have a consistent and sufficient income stream to cover monthly mortgage payments. To verify income, lenders typically request documentation such as recent pay stubs, W-2 forms for the past two years, and tax returns for the last two years, especially for self-employed individuals.

Your Debt-to-Income (DTI) ratio is another crucial metric. This ratio compares your total monthly debt payments to your gross monthly income. For example, if your total monthly debt payments (including the prospective mortgage payment) are $2,000 and your gross monthly income is $5,000, your DTI ratio would be 40%. Lenders generally prefer a DTI ratio of no more than 36%, though some may approve loans with a DTI up to 43% or even 50% for certain loan types like FHA loans. A lower DTI indicates a greater capacity to handle additional debt.

Your down payment and available cash reserves also weigh heavily. A larger down payment can reduce the loan amount, potentially leading to lower monthly payments and sometimes better interest rates. Conventional loans may require as little as 3% to 5% down, while FHA loans typically require 3.5%. VA and USDA loans often allow for zero down payment for eligible borrowers. Lenders also look for cash reserves, which are funds remaining after closing that could cover several months of mortgage payments. Having two to six months of reserves in liquid assets like savings or investment accounts can strengthen your application, particularly if you have a lower credit score or other risk factors.

Finally, your employment history provides insight into your income’s reliability. Lenders generally prefer a stable and consistent employment history, often looking for at least two years in the same or a similar line of work. A steady work record demonstrates predictable income, which is a significant factor in a lender’s risk assessment.

Steps Before Mortgage Application

Before formally applying for a mortgage, undertaking several preparatory steps can significantly improve your chances of approval and secure favorable terms. Start by reviewing your credit reports from the three major bureaus: Equifax, Experian, and TransUnion. You are entitled to a free copy from each bureau once every 12 months via AnnualCreditReport.com. Examine these reports for any inaccuracies, such as accounts you don’t recognize, incorrect balances, or erroneous late payments. Correcting errors before applying can prevent delays or negatively impact your loan terms.

Next, gather all necessary documentation. Lenders require extensive paperwork to verify your financial information. This typically includes:
Personal identification (driver’s license, Social Security card)
Pay stubs (most recent 30 days)
W-2 forms (past two years)
Tax returns (past two years)
Bank statements (last two months)
Investment and retirement account statements
Details on existing debts (student loans, auto loans)

A crucial preparatory step is obtaining a mortgage pre-approval. This differs from pre-qualification, which is a less formal estimate based on self-reported information. Pre-approval involves a more thorough review of your financial documents and a hard credit check, resulting in a conditional commitment from a lender for a specific loan amount. A pre-approval letter demonstrates to real estate agents and sellers that you are a serious and qualified buyer, giving you a competitive edge in the housing market.

Finally, create a realistic budget for homeownership that extends beyond just the mortgage payment. Consider recurring costs like property taxes, homeowner’s insurance, and potential Homeowners Association (HOA) fees, which are often included in your monthly mortgage payment (PITI: Principal, Interest, Taxes, Insurance). Also, factor in utilities, maintenance, and unexpected repairs, which can amount to 1% to 4% of the home’s value annually. Understanding these expenses ensures you are financially prepared for homeownership.

The Mortgage Application and Approval Process

After completing your preparatory steps, the formal mortgage application and approval process involves several distinct phases. The process begins with submitting your completed mortgage application package. This typically involves an online portal, direct submission to a loan officer, or mail. Once submitted, the lender’s underwriting team initiates a comprehensive review, verifying all the financial information and documentation you provided. This verification process ensures accuracy and assesses the overall risk associated with lending to you.

During underwriting, the lender will also order an independent appraisal of the property. The appraisal determines the home’s market value to ensure it supports the loan amount requested. Simultaneously, it is advisable for the buyer to arrange an independent home inspection. While not required by lenders, a home inspection assesses the property’s physical condition, identifying potential issues or necessary repairs that could impact your investment.

Following a successful underwriting review and satisfactory appraisal, your loan will receive conditional approval. This means the lender is prepared to finalize the loan, provided any remaining conditions are met. These conditions might include submitting updated financial documents, clarifying specific entries, or addressing minor discrepancies. The final step is loan closing, where all parties sign the necessary legal documents, funds are transferred, and ownership of the home is officially transferred to you.