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Taylor Sansano
Most loans require a score between 580 and 620
If you’re thinking about buying a house, you’ve no doubt spent time considering your credit score. It feels like so much is riding on this one number, but your credit history isn't the only thing lenders look at when making a decision about your mortgage.
Most lenders consider any score above 740 to be “very good,” but you can qualify for some loans with “good” or even “fair” credit.
There’s no hard-and-fast rule about what score is good enough to qualify for a mortgage. It depends on what type of mortgage loan you get and other factors that we'll explain below.
Minimum credit score | Best for | Learn more | |
---|---|---|---|
Conventional loan | 620 | Traditional homebuyers | Compare lenders |
FHA loan | 500 to 580 | Buyers with low to moderate income | Compare lenders |
USDA loan | 620 to 640 | Buyers in rural areas | Compare lenders |
VA loan | 580 to 620 | Veterans | Compare lenders |
Jumbo loan | 680 to 700 | Buyers in high-price markets | Compare lenders |
Conventional mortgages (through a private lender, not insured by the federal government) have the strictest credit score requirements. For a conventional mortgage, you need a FICO credit score of at least 620. Jumbo loans, which are nonconforming conventional loans, typically require a score between 680 and 700.
FHA loans are common among first-time buyers because they are easier to qualify for. The credit score requirements are different depending on how much you are able to put down: If you have a FICO Score between 500 and 579, you need to put at least 10% down, but you can get away with a 3.5% down payment if your score is above 580.
VA loans have even looser credit score requirements. The Department of Veterans Affairs doesn’t have a minimum credit score requirement, but most lenders like to see scores start at between 580 and 620. You must meet minimum service requirements and present a Certificate of Eligibility (COE) to a VA-approved lender to qualify.
Similarly, the U.S. Department of Agriculture doesn't have a set minimum requirement, though most lenders like to see a credit score of at least 640 for USDA loans. You still have to demonstrate “a willingness and ability to repay debts” and meet specific income requirements. Alternative credit is allowable for people without traditional credit.
Because mortgages require borrowing so much money, lenders want to be sure they can really trust you to pay it back. If you’ve had bills go to collections or you’ve filed for bankruptcy, these could be red flags. Lenders also look for derogatory items and delinquent accounts.
Your FICO score is based on information in your credit reports. This three-digit number provides lenders a “snapshot of your financial habits. The more missed or late payments on your credit reports, the more likely it is that your FICO Score will be low,” according to Rocket Mortgage.
Your credit report is a financial report card. Your credit score is the grade. It goes up or down based on how well you’ve paid back money you’ve borrowed in the past — with credit cards, car loans and student loans, for example.
Your credit report is a financial report card. Your credit score is the grade.”
These are the most critical factors in your credit score:
If you have a very low score, you might have a better chance of qualifying if you’re able to offer a higher down payment (typically around 20% or more of the home’s purchase price). You can get advice from a housing counselor through the Department of Housing and Urban Development.
While your credit history is an essential piece of the puzzle, it’s important to know the other factors mortgage lenders look at as they assess your merit as a borrower.
Banks generally offer the lowest interest rates to those with the best credit scores, and, as a result, APRs, or annual percentage rates, are lower for borrowers with higher scores.
The average credit score in the U.S in 2020 was 710.
Most lenders consider any score above 740 to be very good. If you’re above 760, lenders might offer incentives like credits and rebates because they can be more sure you won’t default. Combined with a lower interest rate, this can save you a lot of money in the long run.
A couple of percentage points might seem minor, but it can add up to significantly higher costs in your monthly mortgage payment and over the life of the loan. Below, compare average rates for a 30-year fixed mortgage for a $300,000 loan (as of publishing).
Keep in mind that your mortgage rate is determined by multiple factors —your credit score is just one of these. Lenders also consider your income and employment status, which don’t affect your credit score one way or the other.
FICO score | APR | Monthly payment |
---|---|---|
760 to 850 | 2.804% | $1,233 |
700 to 759 | 3.026% | $1,269 |
680 to 699 | 3.203% | $1,298 |
660 to 679 | 3.417% | $1,333 |
640 to 659 | 3.847% | $1,406 |
620 to 639 | 4.393% | $1,501 |
Average rates for a 30-year fixed mortgage by credit score, according to FICO, as of Dec. 15, 2021.
If your credit score is on the lower end of the spectrum, it’s smart to take steps to improve it before applying for a loan. This will unlock better interest rates and keep your costs as low as possible.
Lowering your credit utilization while increasing debt payments will help boost your score. Avoid applying for any new credit cards if you can, but don’t close old accounts.
Here are three more tips to fix your credit enough to buy a home.
First, write down all of your living expenses. Be sure to include electricity, gas and water bills, car maintenance (including fuel), food, groceries and any miscellaneous items, like money spent on entertainment or child support payments.
Then, write down how much money you earn each month (total regular income after all deductions).
Subtract your expenses from your income. This is your budget. If it’s a negative number, look for ways to reduce expenses or increase your income. Seeing it all on paper helps you come up with a plan for how to spend and save each month.
Understanding how much you owe is the first step to getting out of debt. Make a list of all your creditor expenses, such as credit cards, student loans and car payments. Next to each, write down how much you owe and the interest rate.
It’s usually most strategic to pay off high-interest debt first. A consultation with a credit counselor could be helpful if you’re struggling with a lot of credit card debt. You might also consider a debt management plan.
Your credit history shows how well you pay back money you borrow. Creditors are the people or institutions that lend you money, and they can be surprisingly willing to negotiate.
If your credit score is low due to errors on your report (caused by identity theft, for example), consider working with a credit repair company to get them removed. If you don’t have any credit, look into building some up with a secured credit card.
How long it takes to fix your credit enough for approval varies. It could take two months or two years. Once your score meets your goal, contact mortgage lenders in your area to see which loan options and interest rates you can get.
Next, you’ll get to search for a house and figure out how to handle the down payment. In some cases, you can buy a house with no money down. Down payment assistance is also available.
Mortgage lenders use scores from the three national credit bureaus (Experian, Equifax and TransUnion) in something called a “tri-merge.” Your tri-merge credit report gives lenders an idea of how likely you are to repay a loan.
Each credit bureau has a slightly different score model. Mortgage lenders typically look at your FICO Score 2 (Experian), FICO Score 4 (TransUnion) and FICO Score 5 (Equifax).
A few credit blips shouldn’t prevent you from being a homeowner. Because lenders consider borrowers with low credit scores to be “riskier,” you might have to make up for it with a more substantial down payment or add a co-signer to the loan.
For government-backed loans, you can apply with a credit score as low as 500. Remember, your credit score takes a small ding if the lender does a hard inquiry during the mortgage preapproval process.
If you keep getting denied, there are ways to boost your score. Read how to find the best bad credit home loans for more information.
There are several ways to check your credit score. You might be able to see your score for free through your credit card company. You can also sign up for a credit monitoring service (paid subscription model). Before checking your score, check out your credit report (free through AnnualCreditReport.com ) to make sure all the information is accurate.
You basically need the same credit score you need to get a house (at least 580 to 620) to buy a condo. There are also income and down payment requirements. In some ways, condo mortgages are more complicated and harder to get than a traditional home loan, however.
Five primary factors affect your credit score : payment history, debt utilization, length of credit history, types of credit utilization and number of recent credit inquiries.
The three credit reporting bureaus weigh these factors differently. For example, FICO pays the most attention to your payment history and the total amount of debt. VantageScore heavily considers your total credit usage, available credit and credit mix.
Mortgage lenders generally require a credit score of at least 580 to 620 to buy a house. Lenders consider any score above 740 to be “very good.” But you don’t actually need a good credit score to buy a house — you can get a government-backed FHA loan, for example, with a credit score as low as 500. However, it can be strategic to boost your credit before you try to buy a home — you’ll get better rates and have more options.
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