At what credit score can i buy a house

Credit scores typically range from 300 to 850, and borrowers within a certain range can qualify for mortgage loans. While you don't need a perfect 850 credit score to get the best mortgage rates, there are general credit score requirements you will need to meet in order to take out a mortgage.

Prospective home buyers should aim to have credit scores of 760 or greater to qualify for the best interest rates on mortgages.

However, the minimum credit score requirements vary based on the type of loan you take out and who insures the loan. Of our list below, conventional and jumbo loans aren't insured by the government and often have higher credit score requirements compared to government-backed loans, like VA loans.

Having a higher credit score makes a big difference in the amount of money you pay over the course of a loan. Borrowers with scores in the higher range can save thousands of dollars in interest payments over the life of a mortgage.

Here are the minimum credit score requirements for several mortgage loans, using estimates from FICO.

1. Conventional loan

Minimum credit score required: 620

Conventional mortgage loans aren't insured by a government agency, like the U.S. Department of Veteran Affairs or the U.S. Department of Agriculture. Instead, these loans follow standards set by government-sponsored mortgage loan companies, Fannie Mae and Freddie Mac. Conventional loans may be secured by one of these companies or a private lender. These loans are more affordable and require a minimum 620 credit score. Down payment amounts vary.

Conventional loans are divided into conforming or non-conforming loans based on whether they "conform" or follow lending rules set by Fannie Mae and Freddie Mac. Conforming loans follow the standards set by these organizations, such as maximum loan amounts, while non-conforming loans may exceed those limits and are considered "jumbo" loans, which we discuss the credit requirements for next.

2. Jumbo loan

Minimum credit score required: 680

A jumbo loan exceeds the maximum loan amount limits set by the Federal Housing Finance Agency. These loans aren't eligible to be insured by Fannie Mae or Freddie Mac, which means lenders take on more risk in the case you default on payments. Due to the larger loan amounts and riskier nature of these loans, borrowers need to meet higher credit score requirements of at least 680. Like conforming conventional loans, down payments vary.

3. FHA loan

Minimum credit score required: 500 (with 10% down) or 580 (with 3.5% down)

An FHA loan is insured by the Federal Housing Administration and an option for borrowers who are deemed a higher risk due to low credit scores and little money to put toward a down payment. The credit score requirements differ based on how much money you plan to put down. Borrowers with higher credit scores can qualify to make a lower down payment.

Here's the breakdown:

• Minimum 500 credit score, needs 10% down payment
• Minimum 580 credit score, needs 3.5% down payment

Keep in mind that if you make a down payment less than 20%, lenders will probably require you to take out primary mortgage insurance (PMI) to cover the cost if you default. PMI can cost as low as 0.5% to upwards of 2% of your loan amount annually, according to Experian.

4. VA loan

Minimum credit score required: None officially, though many lenders prefer 620

A VA (Veteran Affairs) loan is insured by the U.S. Department of Veteran Affairs and designed for eligible members of the military community and their spouses. This type of loan doesn't require a down payment. And while the VA doesn't set credit score requirements, most lenders will require a minimum 620 credit score.

5. USDA loan

Minimum credit score required: None officially, though most lenders prefer 640

A USDA loan is insured by the U.S. Department of Agriculture and meant for low- to moderate-income home buyers. Similar to a VA loan, the USDA doesn't require a down payment and doesn't set a minimum credit score requirement. However, most lenders will require borrowers to have a 640 or greater credit score.

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• The minimum credit score that you'll need to buy a house varies by lender and loan type.
• You'll typically need a credit score of at least 620 for conventional loans.
• To qualify for the best interest rates on a mortgage, aim for a credit score of at least 740. 
• Get your free credit score with Credit Karma »

Credit scores play a critical role in the home-buying process. If you have a  strong credit score, you'll have a better chance of securing a mortgage at an attractive interest rate.

Now, you don't need a perfect credit score to buy a house. You may be surprised to learn that minimum credit score requirements will vary by lender and loan type.

What credit score is needed to buy a house?

Ultimately, there is no singular credit score that can guarantee you a mortgage approval. Each lender is free to set its own credit score requirements. 

Many loan types are insured by government organizations. As a result, lenders cannot accept borrowers with credit scores below the minimum these organizations set. The four most popular home loan types are:

Conventional

Not backed by any government agency, but must meet the Fannie Mae and Freddie Mac underwriting guidelines.

Minimum credit score: 620

FHA

Loans backed by the Federal Housing Administration.

Minimum credit score: 580 for a 3.5% down payment; 500 for down payments of at least 10%

VA

Loans backed by the US Department of Veterans Affairs (for military members).

Minimum credit score: No minimum

USDA

Loans backed by the US Department of Agriculture (for low- to moderate-income families who buy homes in rural areas).

Minimum credit score: No minimum, but with a credit score of at least 640 you could qualify for streamlined credit analysis

It's important to point out lenders are free to set higher minimum credit score requirements than what the loan-backing organizations require. For example, Quicken Loans says that the lowest score it will consider for a VA Loan is 620, despite the Veterans Administration having no set limit. And, during the COVID-19 pandemic, many lenders are requiring higher credit scores to stem the tide of mortgage applications.

What is a good credit score for buying a house?

So far we've only discussed the minimum credit score that a mortgage lender will consider. But what type of credit score could qualify you for the best rates? FICO breaks its credit scores into five ranges:

Aiming to get your credit score in the "Good" range (670 to 739) would be a great start towards qualifying for a mortgage. But if you're wanting to qualify for the lowest rates, try to get your score within the "Very Good" range (740 to 799).

It's important to point out that your credit score isn't the only factor that lenders consider during the underwriting process. Even with a strong score, a lack of income or employment history or a high debt-to-income ratio could cause the loan to fall through.

How credit scores affect mortgage interest rates

Your credit score can have a major impact on the overall cost of your loan. FICO publishes data that shows how your credit score could affect your interest rate and payment. Below is a snapshot of the monthly cost of a $300,000, 30-year fixed-rate mortgage in October 2022:

That's an interest variance of over 1.5% and a $322 difference in monthly payment from the 620 to 639 credit score range to the 760+ range. 

Those differences can really add up over time. According to the Consumer Financial Protection Bureau (CFPB), a mortgage with a 5.25% interest rate costs over $43,000 more overall over 30 years than a mortgage with a 4.125% interest rate. 

How to improve your credit score 

The first step to improving your score is finding out where you stand. During the coronavirus pandemic, you can check your credit report for free once every week with all three major credit bureaus (TransUnion, Equifax, and Experian) at AnnualCreditReport.com. 

If you find errors on any of your reports, you may dispute them with the credit bureau as well as with the lender or credit card company. When it comes to your credit score, your bank or credit card issuer may provide your score for free. If not, you can also use a free credit score monitoring tool like Credit Karma or Credit Sesame.

What can you do if you discover that your score needs improvement?

You could pay down your credit card balances to reduce your credit utilization rate. Also, avoid applying for any new forms of credit during the months leading up to a mortgage application. 

Most importantly, you'll want to pay your bills on time each and every month. Your payment history is the factor that has the biggest influence on your credit score. Building a consistent history of on-time payments will always be a surefire way to improve your score.

Clint Proctor is a freelance writer and founder of WalletWiseGuy.com, where he writes about how students and millennials can win with money.  When he's away from his keyboard, he enjoys drinking coffee, traveling, obsessing over the Green Bay Packers, and spending time with his wife and two boys.

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