What credit score is needed to buy a house? It varies by loan type

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  • The minimum credit score that you’ll need to buy a house will vary by lender and loan type.
  • For conventional loans, you’ll need a credit score of at least 620. But with FHA, VA, or USDA loans, you may be able to qualify with a lower score.
  • 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. The stronger your score, the better the chance that you’ll be able to secure a mortgage at an attractive interest rate.

The good news is you don’t need a perfect credit score to buy a house. And 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 their own credit score requirements. 

But many loan types are insured by government organizations. And 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 that 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:

Below 580 Very Poor
580 to 669 Fair
670 to 739 Good
740 to 799 Very Good
800 and above Exceptional

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. Each day, 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 $200,000, 30-year fixed-rate mortgage in February 2020:

760-850 3.281% $874
700-759 3.503% $898
680-699 3.680% $918
660-679 3.894% $943
640-659 4.324% $993
620-639 4.870% $1,058

That’s an interest variance of over 1.5% and a $180 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 $200,000 home with a 5.25% interest rate costs $94,000 more overall over 30 years than a mortgage with a 3% interest rate. 

How to improve your credit score before you buy a house

The first step to improving your score is to find out where you stand. You can check your credit report for free once every 12 months with all three major credit bureaus (TransUnion, Equifax, and Experian) at AnnualCreditReport.com. 

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.

What can you do if you discover that your score needs some love? One idea would be to 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. 

And, most importantly, 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.

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