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Tips for getting a mortgage with a 680 credit score

Dan Green
The Mortgage Reports contributor

How a 680 credit score affects your mortgage

For quite some time, mortgage rates have held near historic lows.

This boosts the “amount of home” a home buyer can purchase; and has increased the monthly savings available via a home loan refinance.

However, as many borrowers have learned the hard way, not everyone can access ultra-low rates.

For borrowers with conventional loans, the ability to access these “best mortgage rates” is directly linked to their credit score.

But certain loan programs — specifically tailored to those with lower credit — can be more cost-effective. Here’s what you should know.

See what rate your credit score can get you (Dec 3rd, 2020)

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Is 680 a good credit score?

FICO puts a 680 credit score in the “good” range. That means a 680 credit score is high enough to qualify you for most loans.

However, while 680 is a good credit score, it’s not the most competitive one.

What do we mean by that?

Well, in the second quarter of 2020, the median credit score for new mortgages was 784. And about 75% of mortgage borrowers had a credit score above 700.

So when mortgage lenders are looking at a 680 credit score, they’ll typically see it as good enough to qualify you for a loan — but not high enough to offer ultra-low rates.

That means it’s extra important to shop around with a few different lenders before deciding on a mortgage loan.

All lenders evaluate credit a little differently, and some are specifically geared toward borrowers with moderate credit scores.

One of these companies will be able to offer you a lower rate than a lender that prefers borrowers with scores in the mid- to high-700s.

See what rate your credit score can get you (Dec 3rd, 2020)

Mortgage loans you can get with 680 credit

As mentioned above, a 680 credit score is high enough to qualify for most major home loan programs.

That gives you some flexibility when choosing a home loan. You can decide which program will work best for you based on your down payment, monthly budget, and long-term goals — not just your credit score.

Here’s a high-level comparison of the different mortgage loans you can get with a 680 credit score:

Mortgage Loan Type Minimum Credit Score & Down Payment Mortgage Insurance Best For
Conventional 97

620

3%

PMI required, but can be cancelled later Borrowers with a down payment of 3% and good credit

Fannie Mae HomeReady/

Freddie Mac Home Possible

620

3%

PMI required, but can be cancelled later Lower-income home buyers
Conventional Loan

620

5%

PMI required with less than 20% down Borrowers with a down payment of 5% or more
FHA Loan

580

3.5%

Mortgage insurance premium (MIP) required Lower-credit borrowers
VA Loan

580

0%

No continuing mortgage insurance Veterans and service members
USDA Loan

640

0%

Mortgage insurance required, but it’s lower-cost than FHA or conventional Buying a home in a rural area

Home buyers in the 680 range might find themselves deciding between an FHA loan or a conventional loan.

If you can make a 20% down payment, getting a conventional loan should be a no-brainer since you’ll be spared the cost of mortgage insurance.

If you’re making a smaller down payment, you may be better off with a 3%-down conventional loan than an FHA loan. Options include the conventional 97 loan, the Fannie Mae HomeReady loan, and the Freddie Mac Home Possible loan.

Both types — conventional and FHA — require mortgage insurance. However, a conventional loan allows you to cancel mortgage insurance later on without refinancing the mortgage. Plus, there’s no upfront mortgage insurance fee on a conventional loan like there is on an FHA loan.

FHA is typically the better choice for people with credit scores in the high 500s to low 600s, who aren’t quite over the threshold of qualifying for a conventional loan.

And for anyone with eligible military service, a VA loan is often the best choice. VA loan rates are usually the lowest on the market, and no down payment is required. So if you’re a service member, veteran, or have another military affiliation, this option is worth looking into.

Find the best mortgage loan for you (Dec 3rd, 2020)

Mortgages that are harder to get with 680 credit

There are a few mortgage loan types that will be tougher to get with 680 credit. Namely:

  • Jumbo loans — Typically require a 700-720 credit score or higher. In most parts of the U.S. a jumbo loan is any mortgage over $510,400
  • 80/10/10 loans — This is a sort of hybrid mortgage that involves getting both a traditional mortgage loan and a home equity loan at the same time to avoid mortgage insurance. 80/10/10 loans might be available with a credit score of 680, but it will be easier to get one with a score in the 700s
  • Home equity loan or home equity line of credit (HELOC) — Home equity financing may be available with a 680 credit score. But many lenders set their own minimums starting at 700 or higher

If you’re looking to buy a more expensive home or tap into your home equity, it might be worth raising your credit score a little before you apply.

Even if you can qualify for one of these loans with a score of exactly 680, you’ll get better rates if your score is 700 or above.

How a 680 credit score affects mortgage rates

Conventional loan mortgage rates vary widely based on a borrower’s credit score.

Prime mortgage borrowers — those with 20% down and a credit score above 720 — get access to the “best and lowest mortgage rates” you see advertised online and in print. Everyone else gets access to something different.

When it comes to setting rates, 680 is right in the middle of the line.

Take a look at a snapshot of FICO’s mortgage rate tool, which shows how rates vary based on credit score:  

Credit Score APR1 Monthly Payment
760-850 2.501% $1,186
700-759 2.723% $1,220
680-699 2.900% $1,249
660-679 3.114% $1,283
640-659 3.544% $1,355

1APR refers to the ‘effective interest rate’ you’ll pay each year after the mortgage rate and loan fees are combined

2This rate snapshot was taken on September 8, 2020, and is for sample purposes only. It assumes a loan amount of $300,000. Your own interest rate and monthly payment will vary. Get a custom mortgage rate estimate here

In this example, the borrower with a 680 credit score pays $63 more per month than someone with a 760 credit score.

That might sound like a small difference. But it adds up to $750 more per year, and an extra $22,500 over the course of a 30-year loan.

This is why experts recommend getting your credit score up as much as possible before applying for a home loan. Small differences in the short term can mean big savings in the long run.

Tips to get the best mortgage rate

As any mortgage professional will tell you, the only way to find the lowest mortgage rate is by shopping around.

Get estimates from at least three lenders — and remember to look at more than just the interest rate. Also compare:

  • APR — Your ‘effective’ rate when fees and loan costs are added in
  • Points — Is the lender charging extra via “discount points” to reach the offered rate?
  • Closing costs — How much does the lender charge upfront to set up your loan?

These figures will show you which lender is offering the best deal overall, not just a low rate with hidden fees that jack up the cost.

Remember, a 680 credit score is right on the borderline of “good.”

So it’s even more important to find a lender that will look at your credit profile favorably and offer you a great deal on your mortgage.

Verify your new rate (Dec 3rd, 2020)

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