What’s A Good Credit Score To Buy A House?

Credit scores can be a confusing topic for even the most financially savvy consumers. Most people understand that a good credit score boosts your chances of qualifying for a mortgage because it shows the lender you’re likely to repay your loan on time. That’s why many lenders require minimum credit scores for loans.

But do you know the minimum credit score you need to qualify for a mortgage to buy a house? And did you know the minimum credit score to qualify can vary depending on the mortgage you want?

To buy a house with a conventional loan, for example, you’ll need at least a 620 credit score. But don’t worry. Even if your credit score hovers somewhere in the 500 – 600 range, you can still secure a home loan.

While every lender is different, knowing your score and how it may impact your loan application is key.

Follow our step-by-step guide to learn how to buy a home.

What Credit Score Is Needed To Buy A House?

The minimum credit score you need to qualify for a mortgage depends on the type of home loan you’re trying to obtain.

Conventional Loans

Conventional mortgages are home loans that follow the standards set by Fannie Mae and Freddie Mac. They typically offer competitive interest rates and flexible mortgage repayment terms that range from 8 to 30 years. Conventional loan financing is typically best for borrowers with good or excellent credit because they require a higher credit score than government-backed loans.

To secure a conventional loan to buy a house, most lenders typically require a minimum credit score of 620. However, the final decision on what works as a qualifying credit score will rest with the lender. Some lenders will let you buy a home with a 620 credit score, and others may require a higher minimum credit score.

FHA Loans

The Federal Housing Administration insures FHA home loans. Lenders are more willing to approve borrowers who would have struggled to meet conventional mortgage requirements because the loans are insured by the FHA.

With down payments as low as 3.5%, FHA loans help prospective home buyers with lower credit scores and smaller amounts saved to make a down payment.

To qualify for an FHA loan that requires a 3.5% down payment, you’ll need a minimum credit score of 580. If you can make at least a 10% down payment, you may qualify for an FHA loan with a 500 credit score.

Keep in mind that FHA loans are issued by private lenders, and lenders may set minimum credit score requirements.

VA Loans

A VA home loan, insured by the Department of Veterans Affairs, may assist your homeowning aspirations. VA loans don’t require a down payment, and they’re available to borrowers with lower credit scores.

To qualify, you must be an eligible member or veteran of the U.S. armed forces, a member or veteran of the U.S. Army Reserves or National Guard or a surviving spouse to apply for a VA loan.

The VA has no minimum credit requirement, but many lenders require borrowers to have a minimum credit score of at least 580.

USDA Loans

The U.S. Department of Agriculture offers USDA home loans to promote rural development. To qualify for this type of mortgage, you must purchase a single-family residence in an eligible rural location. And your household income can’t be more than 115% of the area’s median household income.

The USDA doesn’t set a minimum credit score requirement for home buyers, but lenders can require one. Many lenders require a credit score of 640 or higher for initial approval. However, depending on the situation, you may be approved with a lower credit score.

Jumbo Loans

A jumbo loan is similar to a conventional mortgage, except the loan amount for a jumbo loan exceeds the conforming limits set by the Federal Housing Finance Agency (FHFA).

To be approved for a jumbo loan, borrowers typically need a low debt-to-income ratio, a high credit score and a substantial amount of cash reserves.

Since jumbo mortgages allow a high loan amount, lenders can be stricter about their minimum credit score requirements. For example, you may need a 740 credit score if you choose a fixed or adjustable-rate 15-year jumbo loan. But you may qualify for a 30-year fixed-rate jumbo loan with a 680 credit score.

See What You Qualify For

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Factors That Go Into A Credit Score

It’s important to know your credit score and understand what affects it before you begin the mortgage process. Once you know how it all works together, you can build your credit score or maintain it to give yourself the best chance of qualifying for a mortgage.

While exact scoring models may vary by lender, some variation of the standard FICO® Score is often used as a base. FICO® pulls variables from the three major credit bureaus (Equifax®, Experian™ and TransUnion®) from your credit reports and compiles your score. FICO® Scores range from 300 – 850 and are based on:

The higher your score, the easier it should be to qualify for a lower interest rate on a great mortgage.

Additional Factors Lenders Consider For A Mortgage

Your credit score is a key factor in determining whether you qualify for a mortgage. But it’s not the only factor lenders consider. Your mortgage lender will also evaluate your:

How To Improve Your Credit Score Before Buying A House

Fortunately, credit scores aren’t static – you can improve them. Be aware, though, that there are no quick fixes. It takes time to build up a low credit score.

Take these steps to help boost your credit score before filling out a mortgage application:

What’s A Good Credit Score To Buy A House: FAQs

If you have additional questions about the best credit score to buy a house, we have answers.

The Bottom Line

The credit score required to buy a home may differ based on the type of loan you’re applying for. But, no matter what type of financing you’re thinking about, the higher your credit score is, the easier it should be to get a better interest rate on your mortgage.