What’s The Minimum Credit Score to Buy a House?

Kylie Ora Lobell
Jan 25, 2022

It’s your dream to one day be able to purchase a home. Owning a home would mean that you could customize it how you want, have more stability, reach your financial goals, and possess a piece of property to hand down to the next generation.

However, there is only one thing that could be standing in your way: You aren’t sure if your credit score is high enough to get the home you want. Now you’re wondering: Is there a minimum credit score to buy a house?

By finding out the answer, you can take the right steps in order to qualify for a home loan and be that much closer to becoming a homeowner.

Table of Contents

Is There a Minimum Credit Score To Buy a House?

Credit scores range from 300 to 850. According to Experian, a site that provides free credit reports, the breakdown for scores is this:

  • 300-579: Very Poor
  • 580-669: Fair
  • 670-739: Good
  • 740-799: Very Good
  • 800-850: Exceptional

Most people have a very good score, followed by good and exceptional scores.

Technically, there is no minimum credit score requirement to buy a house. But keep in mind that if you don’t have a minimum credit score of 620, then you likely won’t qualify for a conventional loan.

If you have bad credit, then you either won’t qualify for a loan or you may only qualify for a loan with a high interest rate. Of course, this is not an ideal scenario, as it means higher monthly mortgage payments, which could have a negative impact on your finances.

Possible Can Help Improve Your Credit Score.

Types of Housing Loans

There are four types of loans you could potentially qualify for depending on your credit score and specific situation:

Conventional Loans

A conventional loan is a type of mortgage loan that's private; the federal government does not guarantee or insure it. You will likely need to purchase private mortgage insurance (PMI) if you get a conventional loan when you provide a down payment of less than 20% of the home’s price.

Conventional mortgage loans are typically conforming, meaning that they fulfill the requirements to be sold to Freddie Mac or Fannie Mae, government-sponsored enterprises that buy mortgages from lenders and then sell them to investors.

Keep in mind that conventional loans, called jumbo loans, are non-conforming because they allow for higher loan amount limits. If the house you want to purchase is very expensive and you don’t have a large down payment, one of your options might be to take out a jumbo loan. 

VA Loans

VA loans are for veterans, qualified service members, and their spouses. There is no minimum credit score for this type of loan, but one provider, Rocket Mortgage, requires that you have a score of at least 580 for eligibility purposes.

FHA Loans

The Federal Housing Administration insures FHA loans, and only requires a minimum credit score of 580.

You may qualify for an FHA loan if you don’t have much of a down payment to offer, generally between 3.5% and 10%.

These loans are considered a good option for first-time homebuyers, though anyone that meets the requirements can qualify.

USDA Loans

If you plan to live in a qualified suburban or rural area, and your income falls below 115% of the median income there, you may be eligible for a government-backed U.S. Department of Agriculture, or USDA, loan.

Usually, a minimum credit score of 640 is best, but you could potentially qualify if your score is at least 620.

In addition, there are a variety of government and local programs intended to help people afford a home. These vary by area, so it's a good idea to check your local government resources to see what's available to you.

How Credit and Mortgages Work

It’s important to have a good credit score when applying for a mortgage because mortgage lenders want to be certain you’re going to pay the money back.

They are looking to minimize risk, and you will be seen as a risky applicant if your credit score is not high enough.

If you receive the loan and you’re able to secure a mortgage, then it will go on your credit report. You could see your credit score temporarily dip, but as long as you make your payments on time, then your score should go up.

If you miss payments, then your score could go down. Paying more than the minimum for each monthly payment will save you on interest and ensure that you pay off your mortgage faster.

Consequences of a Poor Credit Score When Buying a House

If you have a poor credit score and you want to buy a home, you may not be able to, because lenders won’t give you a mortgage loan.

Or, you may need to put down a bigger down payment with cash in order to make up for the fact that you have bad credit. You might have to find a co-signer who has better credit to sign onto the loan with you.

If you are able to secure a loan, your mortgage rate is likely going to be higher, meaning the loan will be more expensive over time.

According to TIME and MyFICO, the average interest rate for a mortgage for borrowers with a credit score between 700 and 759 is 2.85%, and for borrowers with a score between 620 and 639, it’s 4.22%.

Don’t be discouraged if you are unable to qualify for a loan right now because of your poor credit score.

Instead, try to focus your energy on increasing your score and making yourself more attractive to lenders.

You can do this by:

  • Signing up for Equifax or Experian or going to AnnualCreditReport.com to check your credit report. Monitor your score regularly and report any false information you find on it. 
  • Making your payments on time every month, since payment history is the number one most important factor for your credit score. 
  • Ensuring your credit utilization ratio – or the total amount of debt you have compared to how much credit you have – is under 30%.
  • Keeping credit cards open so that you have a longer credit history. (The trick here is to pay anything you owe off every month. You don't want to carry a balance!)
  • Not signing up for new credit cards unless you’re confident you can pay the bill in full every month.

By following these steps, your low credit score should go up. It may take some time and patience, but you’ll see a big improvement if you stay disciplined and always have the end goal of homeownership in mind.  

Learn more about credit with our Credit Score 101 Guide.

What’s the Ideal Credit Score to Get a Mortgage?

The short answer is that your score should be as high as possible when trying to secure a mortgage.

To qualify for the best interest rates, you should attempt to have a score of 760 or higher. But if you have a lower credit score, you may still be able to get a mortgage with a decent interest rate.

If you have a mortgage with a higher interest rate, you can always try to refinance for a lower interest rate when your credit score goes up.

The key is to determine how much you can afford per month and calculate from there. That work will help you figure out what rates and mortgage terms you can afford, and what credit score you need to get that kind of mortgage.

What To Watch Out For

Now may not be the best time to purchase a home if you have a poor credit score or, at the very least, the minimum credit score to buy a house with a conventional loan.

If you also don’t have enough of a down payment or you’re worried about how you’ll pay your mortgage every month, it’s worth it to wait.

The 2008 housing crash happened because lenders were giving out subprime mortgages – or non-traditional mortgages for people with poor credit scores – and these people often defaulted on their loans, leading to foreclosures. 

You don’t want this to happen to you, so make sure that you are in good financial standing before you decide to try to buy a home.

Do your research on the real estate market in the area where your dream home is located, and see if it’s gone up in value over time. Ask realtors their opinions about homes in the community and whether or not they believe prices will continue to rise.

Note: You may want to also take a look online to see what people are saying about the real estate market in the area. Realtors do have an interest in getting you excited to buy, and some may have rose-colored glasses when it comes to current market trends.

Moving into a home of your own is exciting, but do your due diligence first. Then, you can have peace of mind that you’ve made the right decision for your financial future.

Kylie Ora Lobell

Kylie Ora Lobell is a personal finance writer with over 10 years of experience working with publications like MoneyGeek, Slickdeals, LegalZoom, OppLoans, SoFi and TaxAct. She has also been published in New York Magazine and the Los Angeles Times.

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