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- A good credit score to buy a house varies by lender and loan type.
- You typically need a credit score of at least 620 for conventional loans and 580 for FHA loans.
- You can improve your chances of getting a mortgage by raising your credit score and decreasing your debt.
When you apply for a mortgage loan, lenders will review your finances and check to make sure you meet the requirements of the loan program. These can include things like a minimum credit score or a maximum debt-to-income ratio.
The exact requirements you’ll need to meet vary by loan type, but the first factor a potential lender will review is your credit score.
Minimum credit score requirements by loan type
Many mortgage types are insured by government organizations. As a result, lenders cannot accept borrowers with credit scores below the minimum requirement these organizations set.
The credit score requirements for four of the most popular home loan types are:
- Conventional mortgage: 620. Higher scores may be needed for larger loan amounts or specific programs
- FHA mortgage: 580 with a 3.5% down payment or 500 with a 10% down payment. Insured by the Federal Housing Administration, these loans have more lenient credit requirements.
- USDA mortgage: None, but many lenders require 640 or higher. Offered by the U.S. Department of Agriculture for eligible rural borrowers
- VA mortgage: None, but many lenders require 620 or higher. Guaranteed by the Department of Veterans Affairs for veterans and active-duty service members
It’s important to point out that lenders are free to set higher minimum credit score requirements than what the loan-backing organizations require. Some lenders may require a minimum score of 660 for conventional loans, for example.
How your credit score impacts your mortgage
Your credit score will affect the interest rate on your mortgage loan. Higher credit scores generally lead to lower interest rates, saving you money over the life of the loan.
A good credit score can also qualify you for better loan terms, such as a lower down payment or shorter loan period, and your credit score can determine whether you will be approved or denied for a mortgage loan at all.
Tips to improve your credit score
If your credit score could use some improvement before you apply for a mortgage loan, here are steps you can take to increase your score:
Check your credit report
The first step to improving your score is finding out where you stand. You can check your credit report for free once every week with all three major credit bureaus (TransUnion, Equifax, and Experian) at AnnualCreditReport.com.
Dispute any errors on your credit report
If you find errors on any of your reports, you can 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.
Minimize your existing debt
You could also 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.
Pay your bills on time
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.
Factors to consider beyond your credit score
A potential mortgage lender will review your credit score, but there will be other factors that go into the decision-making process:
Income and employment history
Lenders will also need to verify that you have stable income to afford your payments, so they will look at documents like your tax returns and W-2s from the last two years, recent bank statements, and your last two pay stubs, to name a few.
Debt-to-income ratio
Your debt-to-income ratio (DTI) tells a lender how much of your monthly income goes toward your debt payments. The maximum DTI you can have varies by loan program.
Generally, these are:
- Conventional: 45%
- FHA: 43%
- USDA: 44%
- VA: 41%
There are some exceptions in which you may be able to exceed these amounts. Talk to a loan professional if you’re worried about your DTI.
Down payment
Down payment requirements vary by loan type, too. You’ll typically need at least 3% for a conventional loan (though anything under 20% means you’ll have to pay private mortgage insurance) and 3.5% for an FHA loan. USDA loans and VA loans don’t have minimum down payment requirements. You may also be able to find lower down payment requirements on first-time homebuyer programs.
Another note: Higher down payments typically mean lower interest rates and better loan terms, as they are less risky for the lender.
How to improve your chances of qualifying for a mortgage
If you’re worried about qualifying for a mortgage, there are strategies that can help. You can:
Increase your credit score and pay down your debts
Take the time to improve your credit score. Your credit score will determine what options you have for a mortgage loan, and the higher your score, the better the terms.
Pay down any unnecessary debt. This will lower your debt-to-income ratio and could help you better meet a lender’s DTI requirements.
Save for a larger down payment
A bigger down payment means the lender has to loan you less money, so it can also make qualifying easier. Even better, it might mean lower interest rates as well.
Get pre-approved
Getting pre-approved for your mortgage doesn’t necessarily help you qualify, but it is a smart move before shopping for a home. It can give you an idea of how much you can borrow, what interest rate you’ll get, and what kind of monthly payment to expect. You can also use a mortgage qualification calculator to gauge these numbers.
Frequently asked questions about the credit score needed to buy a house
The best credit score to buy a house is 760.
Yes, you can buy a house with a 500 credit score, but your options will be limited. You may have a higher interest rate, which will increase your mortgage payment.
If your credit score doesn’t qualify for a mortgage, you can always apply again after improving your credit score and reducing your DTI. For mortgages, the exact requirements you’ll need to meet depend on the loan program, so there’s a chance changing the loan type you’re applying for could help, too.