What’s A Good Credit Score To Buy A House, And Why Does It Matter?

When looking to buy a home, a good place to start is checking your credit score and determining whether it’s the credit score needed to buy a house. Your credit score impacts both your eligibility for a home loan and the interest rate you’ll get on the loan if approved. The minimum credit score to buy a house with a conventional loan is 620, but some loan programs have more lenient credit score requirements.

Let’s take a closer look at the credit score you’ll need to buy a house, how the minimum score will vary depending on the type of mortgage you’re seeking, and the impact your credit score will have on your home loan interest rate.

What Credit Score Is Needed To Buy A House?

Although 620 is the minimum credit score to buy a house with a conventional loan, you can qualify with a lower credit score if you’re seeking an FHA loan insured by the Federal Housing Administration. VA loans, backed by the Department of Veterans Affairs, may also have a more flexible credit score requirement.

During the mortgage application process, lenders commonly check the borrower’s FICO^® Score, a credit scoring model that grades consumers on a scale of 300 – 850, with 850 being the highest score possible. According to FICO^® credit bureau data, the best credit score to buy a house is 760 and higher, which tends to unlock the best mortgage rate. The standard credit score ranges are as follows:

• Exceptional: 800 – 850
• Very good: 740 – 799
• Good: 670 – 739
• Fair: 580 – 669
• Poor: 300 – 579

A higher credit score boosts your chances of qualifying for a mortgage because it shows the lender that you’re likely to repay your loan on time.

Credit Score Needed To Buy A House By Loan Type

Again, the credit score you need to buy a house varies with the type of home loan you get and who insures the loan. Eligibility requirements are generally looser for mortgages backed by government agencies, including the VA and FHA. The minimum credit score for conventional loans, including jumbo loans, is usually higher because these loans are insured by private lenders.

Here’s an at-a-glance breakdown of the credit score needed to buy a house with different home loans:

Conventional Loan

Although the minimum credit score to buy a house with a conventional loan is typically 620, some mortgage lenders may require a higher score than others. As a result, you should compare lenders to find the most lenient credit score requirement and apply for preapproval if you’re ready.

Borrowers seeking a conventional mortgage – the most popular home loan program – should have good or excellent credit if they want to qualify for a lower interest rate.

Jumbo Loan

The credit score needed for a jumbo loan is typically higher than the score you’ll need for any other type of mortgage. That’s in part because jumbo loans aren’t backed by a federal government agency. In addition, jumbo loan amounts exceed loan limits set by the Federal Housing Finance Agency (FHFA). Since jumbo loans therefore don’t conform to the guidelines necessary for purchase by Fannie Mae and Freddie Mac in the secondary mortgage market, lenders are stricter in their requirements.

Typically, you’ll need a credit score of at least 700, and you may need one even higher if the amount of the loan is especially high.

FHA Loan

To grant approval for an FHA loan, lenders typically require a median FICO^® Score of 580 with a 3.5% down payment. However, some lenders allow for a score as low as 500 with a 10% down payment. Like with all home loans, having a higher credit score can qualify you for a better interest rate.

FHA loans, which are government-backed home loans insured by the Federal Housing Administration, typically have relaxed credit score requirements compared to conventional loans because lenders are guaranteed repayment if a borrower fails to pay off their mortgage loan in full. This loan program is tailor-made for first-time home buyers and borrowers with a lower credit score, but an FHA loan can also sometimes be a good fit for repeat buyers.

VA Loan

Most lenders require that VA loan applicants have a credit score somewhere in the 580 – 650 range. With some mortgage lenders, however, it may be possible to take out a VA loan with a credit score as low as 500.

In addition, VA loans don’t require a down payment. However, this mortgage program is for a very niche audience, as only eligible active-duty service members, veterans, surviving spouses and members of the National Guard and U.S. Army Reserve may apply.

USDA Loan

The minimum credit score required by most lenders for a USDA loan is 640. You may still be able to qualify for a USDA loan if your credit score is close to the minimum requirement, though, so it’s important to speak with your lender about your mortgage options.

USDA loans are only available to borrowers buying in a relatively rural area. The house you want to purchase must also meet other USDA home eligibility requirements to qualify.

How Your Credit Score Affects Your Mortgage Interest Rate

The interest rate you receive on a home loan is largely tied to your creditworthiness. Your credit score affects your mortgage rate by giving lenders insight into your personal finances, including how likely you are to repay the requested loan amount on time and in full. Lenders typically see borrowers with a lower score as higher risk and will charge a higher interest rate to compensate for this.

Generally, borrowers with a higher score qualify for a lower mortgage rate, which can save them thousands of dollars over the life of a mortgage.

Other Factors That Mortgage Lenders Consider

Mortgage lenders also look at other factors when deciding whether to approve a borrower for a home loan. These factors include:

• Your down payment amount
• Your monthly income and employment history
• Your debt-to-income ratio (DTI)
• Your last 2 years of tax returns
• Your bank statements
• The condition and value of the home you’re buying

With an FHA loan, you’ll pay mortgage insurance – known as MIP – for at least 11 years no matter the size of your down payment. If you put less than 20% of the purchase price down on a conventional loan, you’ll pay private mortgage insurance (PMI) until you’ve built 20% equity in the home.

It never hurts to check out down payment assistance programs, which can help if you’re having trouble coming up with the down payment amount that a particular loan program requires.

Can You Get A Mortgage With Bad Credit?

Based on FICO^® Score ranges, any score in the 300 – 579 range would be classified as “poor” or “bad credit”. That said, it’s possible in some cases to get a mortgage with bad credit – you’ll just have a higher interest rate, make bigger monthly payments and ultimately pay a lot more in interest over time.

You may be able to buy a house with bad credit by adding a co-signer to the mortgage, making a larger down payment or lowering your DTI.

How To Improve Your Credit Score

If your credit score is less than desirable, you can take steps to get your credit score mortgage-ready. Start by requesting your credit reports and looking for errors, which could drag down your score. You can get a free credit report from TransUnion^®, Equifax^® and Experian™ every week at AnnualCreditReport.com. If you find inaccurate information, file a dispute with the creditor and the credit reporting agency. Getting rid of errors may boost your score.

Learning how credit scores work can also bring to your attention any areas of your finances that could stand improvement. Here’s a list of the factors that influence your score and how to make repairs to your score before applying for a mortgage:

• Payment history: This factor makes up 35% of your credit score, so paying your bills on time can boost your credit. Set up monthly reminders or automatic payments to prevent late payments.
• Credit utilization: This refers to the amount of your available credit that you’re using. Try to pay down some of your loan balances and keep your credit card balance to no more than 30% of your credit limit.
• Length of credit history: A long credit history shows lenders you have experience managing debt. Aim to keep credit cards open, even if you rarely use them, to bolster the length of your credit history.
• New credit: A lender might be wary if you apply for credit often. That’s because doing so could cause you to fall behind on your bills. Refrain from opening new credit accounts just before buying a home.
• Credit mix: Since credit mix makes up about 10% of your credit score, the more variety you can have in the credit accounts you’re paying on, the better. For example, it’s more ideal for your credit mix to have a credit card, a student loan and a car loan than only a credit card. Getting a mortgage will likely help your credit score because it adds to your credit mix.

FAQs For Credit Scores And Buying A House

With so much potentially affecting what credit score you need to buy a house, you may still have some questions. Take a look at our answers to some frequently asked ones.

Can I buy a house with a 580 credit score?

Using an FHA loan program, you can usually buy a house with a 580 credit score. Eligible borrowers seeking a VA loan can also qualify with a 580 score in some cases. However, FHA and VA loans differ in their down payment requirements and overall requirements for eligibility.

What is the lowest credit score needed to buy a house?

Some FHA lenders will accept a credit score in the 500 – 579 range with a 10% down payment. However, for conventional loan approval, you’ll likely need a score of no lower than 620.

What is the easiest home loan to get?

An FHA loan is typically seen as the easiest home loan to get approved for, as its credit requirements tend to be looser than the requirements for other mortgages. In most cases, you’ll need a minimum score of 580 and a 3.5% down payment to be approved for an FHA loan, although some borrowers can get approved with an even lower score if they make a higher down payment.

The Bottom Line

Your credit score plays a major role in getting approved for a home mortgage and how much you’ll pay in interest on that mortgage if approved. The credit score you’ll need to buy a house will depend on the loan program you’re pursuing and your individual lender’s requirements. If your score is too low to qualify for the type of mortgage you want, you can improve your score and likely secure your preferred loan program by taking actionable steps.

Is your credit score good enough for a certain mortgage? Start the home loan process with Rocket Mortgage^® today so we can pair you with the best loan program for your situation and help you improve your score if needed.