You’ve saved up a down payment, browsed mortgage companies, and endlessly scrolled the real estate listings — but how much thought have you given to the credit score you need to buy a house?
If you’re trying to get a mortgage, you’ll generally need a credit score of 620 or higher — the higher, the better. Lenders offer the best mortgage rates to homebuyers who have a credit score in the mid-700 range (or higher), but each lender has its own criteria when determining loan approval.
If your score isn’t where you’d like it to be, keep reading. You may have more options than you think.
- Credit score requirements to buy a home
- Can you buy a house with bad credit?
- Improving your credit score
- How a credit score affects your rate
- What other factors do lenders consider?
Credit score requirements to buy a home
“Your credit score will have a direct impact on the loan you get,” said Sarah Alvarez, vice president of mortgage banking at William Raveis Mortgage. “The best loans are reserved for those borrowers who have 740+ credit scores,” she said.
Keep in mind that mortgage lenders may use different scoring models, which can affect scores somewhat. FICO scores are common reference points for lenders — these scores range from 300 to 850, with 850 being the best score. Scores of 670 to 739 are considered good credit scores with FICO. Freddie Mac and Fannie Mae use FICO scores, as do 90% of top lenders, according to FICO.
Another credit scoring model is VantageScore, also used by Freddie Mac, Fannie Mae, and 9 out of 10 of the largest banks, according to VantageScore. Like FICO, VantageScore uses a range of 300 to 850, with good scores falling between 661 and 780. Both FICO and VantageScore base their models on data from the three main credit bureaus: Experian, Equifax, and TransUnion.
If you’re considering government-backed loan programs, such as an FHA loan, you may get approved with a lower credit score than you would with a conventional loan. Here’s a quick comparison of the credit score requirements for various loan types:
| Type | Minimum credit score |
|---|---|
| FHA loans | 500 (with 10% down payment) |
| USDA loans | Varies by lender |
| VA loans | Varies by lender |
| Jumbo loans | 680 (but 700 is more common) |
| Conventional loans | 620 |
FHA loans
Loans that are insured by the Federal Housing Administration (FHA) provide a way for borrowers with less-than-stellar credit to buy a home. You can use an FHA loan to purchase a home with a credit score as low as 500, as long as you can put down 10%. For maximum FHA financing, you’ll need a credit score of 580 or higher.
USDA loans
The U.S. Department of Agriculture backs USDA loans, and they’re designed to benefit homebuyers in rural areas. If you’re seeking a USDA loan, you’ll be more likely to find a lender if you have a credit score of 640 or higher, but the program itself doesn’t set minimum credit score requirements.
VA loans
Veterans, service members, and their spouses can use VA loans, which the U.S. Department of Veterans Affairs backs. These loans don’t require a down payment or private mortgage insurance, and they have lower interest rates than other types of loans. The VA doesn’t set a minimum credit score for VA loans, but your lender might.
Jumbo loans
Jumbo loans are useful when you want to buy a home that costs more than the limit for conventional conforming loans ($726,200 for 2023). To qualify for a jumbo loan, you’ll likely need a credit score of 680 or higher.
Conventional loans
Conventional loans are standard loans — any loan that the FHA, USDA, or VA don’t back. To approve a conventional loan, lenders typically look for a credit score of 620 or better.
Can you buy a house with bad credit?
It’s possible to get a home loan with bad credit, but it’ll be more difficult, and probably more expensive. Not all lenders will approve you, and those that do may charge higher interest rates to make up for their risk in lending to you. Higher rates could cost you tens of thousands of dollars more over the life of the loan.
Instead of trying to buy a house with bad credit, consider pausing your home-buying journey and work to improve your credit score first.
Improving your credit score
If your credit score isn’t ideal, there are some things you can do to improve it, including:
- Get current on your bills. Catching up on delinquent accounts will prevent them from being sent to collections, which negatively affects your score.
- Check your credit report for errors. Any mistakes or wrong information can drag down your credit score unnecessarily. Request a free copy of your credit report on AnnualCreditReport.com, and correct any errors before you start mortgage shopping.
- Make all your payments on time. On-time payments are a big part of your credit history. If you have trouble paying your bills on time, set up a monthly reminder or arrange for automatic payments.
“Keeping your balances on any credit cards low is an easy way to boost your credit in the short term,” Alvarez said.
“Make sure you send the payments prior to the due date,” she added. “I have had many people who think they are doing the right thing by paying off the entire amount after receiving the statement, but it really needs to happen prior.”
How a credit score affects your rate
Boosting your credit score might be enough to save you serious money. Consider this: The average interest rate on a 30-year fixed-rate mortgage was 6.71% as of June 2023, according to Freddie Mac. On a $300,000 mortgage with that rate, you’d pay $1,938 per month for principal and interest, spending $397,617 on interest costs over the life of the loan.
The average credit score on new mortgages was 765 in the first quarter of 2023, according to the New York Federal Reserve. Suppose your lender saw your credit score was significantly lower than that, and offered an interest rate of 8% instead. That rate’s not even 2 percentage points higher — but it would make a big difference in what you pay. At 8%, your monthly payment would be $2,201 for principal and interest, with $492,466 total spent on interest over those 30 years.
In other words, you’d pay $94,849 more on the same loan, just for having a lower credit score.
What other factors do lenders consider?
Of course, your credit score isn’t the only factor that lenders consider when deciding whether to approve a mortgage. They also look at several other important criteria:
- Your credit history: This includes the type of credit accounts you have, plus personal information, repayment history, and whether you have any outstanding liens or judgments against you.
- Your existing debt: Lenders want to know what other debts you’re responsible for, such as monthly auto loan payments. They’ll also want to know how much of your monthly income goes toward your debt. This is known as your debt-to-income ratio.
- Your income: Lenders consider whether your income is sufficient to support yourself, repay your current debts, and repay your new mortgage.
- Your current assets: Your savings or other assets could be used to repay your mortgage if necessary, so lenders like to know what you have.
- Home value: Lenders want to know whether the loan is appropriate for the value of the home.
A mortgage lender wants to be assured that you’re a reasonable risk when it comes to lending money. Lenders want to know that you can afford the loan you seek and that you have the willingness and ability to repay it. The information lenders find will influence the rate they offer, so it’s well worth your while to make your credit score the best it can be.