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What Credit Score Do You Need to Buy a House?
Understanding the credit score requirements for different types of mortgage loans and how to improve your credit score before applying.
Minimum Credit Scores by Home Loan Type
The minimum credit score needed to buy a house can range from 500 to 700, depending on the type of mortgage loan you’re applying for and your lender. Here’s a quick summary of what you can expect:
| Loan Type | Minimum Credit Score |
|---|---|
| Conventional loan | 620 |
| Jumbo loan | 700 |
| FHA loan | 500 |
| VA loan | 620 |
| USDA loan | 580 |
How Your Credit Score Affects Mortgage Rates
Your credit score is a crucial factor in determining your eligibility for a mortgage loan. While meeting the minimum score requirement can help you get approved, it may not be enough to make your monthly payment affordable. Here’s the average mortgage rate by FICO® Score range, as of mid-July 2024:
| FICO® Score Range | Average Interest Rate |
|---|---|
| 760 — 850 | 6.237% |
| 700 — 759 | 6.459% |
| 680 — 699 | 6.636% |
| 660 — 679 | 6.85% |
| 640 — 659 | 7.28% |
| 620 — 639 | 7.826% |
Other Factors Mortgage Lenders Consider
Although your credit score is crucial, it’s just one of many aspects of your creditworthiness. Here are some other factors that lenders will look at to determine your eligibility and loan terms:
- Credit history: Lenders will review your credit reports for any red flags, such as a foreclosure or bankruptcy.
- Debt-to-income ratio: Generally, you’ll want a DTI below 43%.
- Work history: A stable work history can improve your odds of getting good terms.
- Down payment: A higher down payment can help make up for a lower credit score and can even qualify you for a lower interest rate.
- Assets: Lenders may evaluate your assets to see how financially stable you are.
Can You Get a Mortgage With a Bad Credit Score?
It’s possible to get approved for a mortgage with poor credit, but it may come with higher costs. Here are a few tips that can help you potentially score a decent interest rate:
- Consider an FHA loan.
- Minimize other risks by making a larger down payment or paying down other debts.
- Shop around and get preapproved with multiple lenders.
- Get a cosigner with good credit.
How to Improve Your Credit Before Getting a Mortgage
Whether you’re thinking about buying a home soon or further down the road, it’s worth spending some time getting your credit ready before you officially begin the process. Here are actions you can start taking now:
- Check Your Credit Score: Knowing where you stand is the first step to preparing your credit for a mortgage loan.
- Pay Down Debt: Paying off debts can lower your DTI and improve your credit score.
- Avoid Applying for New Credit: Applying for new credit accounts can impact your credit score and DTI.
- Minimize Spending: Cutting back on spending can boost your savings and keep your credit utilization rate down.
- Pay All Bills on Time: Your debt payment history is the most important factor of your FICO® Score.
Estimate Your Monthly Mortgage Payment
Use our mortgage calculator to estimate what your monthly payment will be based on a handful of assumptions. This can help you evaluate how much you can afford to spend.
Frequently Asked Questions
What Is a Good Credit Score to Buy a House?
A good credit score to buy a house typically starts at 620 for conventional loans, but higher scores can help you secure better terms.
How Much Money Do I Need for a Down Payment?
The amount needed for a down payment varies, but putting down 20% can help you avoid private mortgage insurance and secure better loan terms.
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