If you’re thinking about buying a house, one of the most important factors you’ll need to consider is your credit score. So, what credit score is needed to buy a house?
The answer depends on the type of mortgage you’re applying for, but in general, a score of 620 or higher is required for a conventional loan. Government-backed loans like FHA, VA, and USDA have more lenient requirements.
In this post, I’ll break down exactly what credit score you need for each type of mortgage and how your score impacts your ability to buy a home.
What credit score do you really need?
Here’s a quick rundown of what you’ll need for different types of loans:
| Loan Type | Minimum Credit Score Required |
|---|---|
| Conventional Loan | 620+ |
| FHA Loan | 500 (with 10% down) |
| 580 (with 3.5% down) | |
| VA Loan | No official minimum, but typically 620+ |
| USDA Loan | 640+ |
Conventional Loans: Aim for a score of 620 or higher. This is the threshold most lenders look for in order to approve your loan. However, higher scores like 740 and above will open the door to the best interest rates and loan terms.
FHA Loans: With FHA loans, you have more options if your score is lower than the minimum requirement for conventional mortgage loans. You can qualify with a score as low as 500 if you have a 10% down payment. If your score is 580 or higher, you can potentially qualify with just 3.5% down. These loans are government-insured, making them a safer bet for lenders, and more accessible for you as a borrower.
VA Loans: If you are a veteran, VA loans can be a fantastic option. Officially, there’s no minimum credit score requirement for VA loans. However, many lenders prefer a score of 620 or higher.
USDA Loans: If the house you are buying is in eligible rural or suburban areas, USDA loans could be an option. These loans often accept scores as low as 640, making them an accessible choice if you meet the location requirements.
So Why does your credit score matter when buying a house?
Your credit score is not just a magic number, it directly affects how much home you can afford. Why? Because your credit score determines your interest rate. The better your score, the lower the interest rate, which means lower monthly payments and more money saved over the life of your loan.
For instance, a person with a 620 credit score might qualify for a loan but at a higher interest rate compared to someone with a 740 score. Over the course of a 30-year mortgage, this difference in interest rates could add up to tens of thousands of dollars!
Don’t Have the Ideal Score? Here’s How you could improve it
If your credit score isn’t quite where it needs to be, don’t panic. There are actionable steps you can take to improve it and boost your chances of securing a great mortgage:
- Pay Down Debt: Reducing your credit card balances can improve your credit utilization ratio, which has a significant impact on your score.
- Make On-Time Payments: Payment history is the largest factor in your credit score. Make sure you’re paying all your bills on time to help build a solid score.
- Check Your Credit Report: Errors on your credit report can drag down your score. Request a free credit report, and if you find any mistakes, dispute them immediately.
- Avoid New Debt: In the months leading up to your home purchase, try not to take on any new debt. New loans or credit cards can temporarily lower your score.
Discover more ways to improve your credit score.
Bottom Line
A credit score of at least 620 is typically required for conventional loans, while FHA loans can accommodate scores as low as 500-580 depending on the down payment. However, the better your credit score, the better your mortgage terms.
If you’re in the early stages of planning your home purchase, focusing on improving your credit score can pay off in the form of lower interest rates and more favorable loan conditions.
