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What Credit Score Is Needed To Buy A House?
By Cassidy Horton MONEY RESEARCH COLLECTIVE
There’s no definitive answer to the question, “What credit score is needed to buy a house?” The minimum everyone shoots for is 620. But different lenders have different requirements, and it ultimately depends on the type of loan you choose, the size of your down payment, and the terms of your loan.
So if you want to know what’s a good credit score to buy a house — including tips on how to boost your score if it’s not high enough — keep reading. By the end, you’ll hopefully have the knowledge you need to march on toward homeownership.
Table of contents
- What’s the ideal credit score to buy a house?
- How to raise your credit score
- What credit score is needed to buy a house FAQs
- Summary of our guide to what credit score is needed to buy a house
What’s the ideal credit score to buy a house?
A credit score of 620 or higher is generally considered “ideal” if you want to buy a house. But according to recent Federal Reserve data, 90% of mortgage borrowers have FICO scores over 650 and 65% have scores over 760.
If you want to check your credit score, you can order a free credit report from AnnualCreditReport.com. Once you know your score, you can start shopping for a new home loan.
The higher your score, the higher your chances are of getting approved and locking in the lowest interest rates.
Credit score needed to buy a house by loan type
Although having a FICO score of 620 is the general rule of thumb for buying a house, it actually varies by loan type. So with that in mind, here’s a look at what average credit score you might need for a conventional loan, FHA loan, VA loan, USDA loan, and jumbo loan.
Conventional loan
Conventional loans are offered by banks, credit unions, and private mortgage lenders. They typically require a minimum credit score of 620. However, some lenders may set higher minimums.
With a conventional mortgage, you may be able to put down as little as 3% on your new home. But keep in mind you’ll pay private mortgage insurance (PMI) if your down payment is less than 20%.
FHA loan
Federal Housing Administration (FHA) loans are government-backed mortgages best for first-time homebuyers and those who don’t qualify for a conventional loan.
If your credit score is 580 or higher, you may be eligible for an FHA loan with a 3.5% down payment. If your credit score ranges from 500 and 579, you may be eligible with a 10% down payment.
VA loan
While there’s technically no minimum credit score requirements for VA loans, most lenders like to see scores of 580 or higher. (Some may set their minimums to 640 or higher — it all depends on which company you use.)
VA loans are available to eligible veterans, active duty service members, reservists, and their qualifying spouses. They’re offered through the U.S. Department of Veterans Affairs.
Another perk of VA loans is that they can be obtained with 0% down. But you’ll need to meet other eligibility requirements to get approved for the loan program. For instance, you’ll need to prove your military service and have enough steady income to meet your mortgage payments.
USDA loan
To qualify for a USDA loan, borrowers typically need a minimum credit score of 640. However, you might get approved with a score as low as 600 if you go through manual underwriting. (This process takes longer as it requires a deeper dive into your finances.)
A USDA loan is a type of mortgage guaranteed by the U.S. Department of Agriculture. USDA loans are available to homebuyers with low-to-average incomes who do not have adequate funds for a down payment.
The property must be located in an eligible rural or suburban area, and the borrower must be able to prove that they can make the monthly payments.
Jumbo loan
The minimum credit score needed to take out a jumbo loan is usually 680, although some lenders may set a minimum of 700.
A jumbo loan is a mortgage that exceeds the conforming loan limits set by Freddie Mac and Fannie Mae. In most areas of the country, the limit is $647,200 for single-family units in 2022. But in high-cost areas, it can be as much as $970,800.
If your loan amount is over these limits, a jumbo loan may be your only path to becoming a homeowner. If you’re thinking of filling out a mortgage application for a jumbo loan, be sure to shop around and compare rates from several different lenders.
How to raise your credit score
If you have a lower credit score, you can use these tips to try to increase your credit score and improve your chances of being approved for a home loan.
- Pay your bills on time. This includes credit cards, student loans, medical bills, auto loans, and other monthly payments. NOTE: As of July 2022, the three credit bureaus will not include medical bills on your credit report unless they’ve been unpaid for at least 12 months. Beginning July 2023, they’ll take it a step further and only report unpaid medical bills that are over $500. So if you have unpaid medical debt on your credit report for $500 or less, your score may improve once these rules go into effect. Read more about these changes at consumerfinance.gov.
- Keep your credit card balances low. Your credit utilization ratio, which is the amount of debt you have compared to your available credit limit, should be below 30%.
- Don’t open new credit cards or close old ones. In the short term, both of these actions can hurt your credit score.
- Check for errors on your credit report. If you see any errors or mistakes, dispute them immediately by contacting the financial institution that reported them.
TIP: Due to the CARE Act, you can request free copies of your credit report each week from each of the three major credit bureaus: Transunion, Equifax, and Experian. To get started, visit AnnualCreditReport.com.
What do lenders look at before approving your credit to buy a house?
Lenders typically look at the following when you apply for a home loan:
- Your FICO credit score
- Your credit history
- Your employment history
- Your debt-to-income ratio, which is the amount of debt you have compared to your income
- Your down payment amount
- The value of the home you’re buying
When you’re ready to start the homebuying process, consider getting pre-approved before you start looking at real estate. That way you know how much home you can afford and what mortgage interest rate you may pay.
Is it possible to get a home loan with bad credit?
It’s definitely possible to get a loan with bad credit. However, even with the very best bad credit loans, you may not have as many options as are offered to people with good credit. And you may be required to make a larger down payment or pay a higher interest rate in exchange.
If you don’t qualify for a conventional loan, a government-backed loan, such as an FHA loan, may be a good option. The FHA issues loans to borrowers with credit scores as low as 500, with a 10% down payment, and as low as 580 with a 3.5% down payment.
What credit score is needed to buy a house FAQs
What is the fastest way to increase your credit score if you want to buy a house?
There is no "fast" way to increase your credit score. However, having an on-time payment history, paying down your balances, and clearing errors from your credit report are the three things that can boost your score the quickest.
What credit score is good enough to buy a house?
This depends on the type of loan you're trying to secure, but the standard minimums are:
- 620 for conventional loans
- 580 for FHA loans
- 640 for USDA loans
- No set minimum for VA loans, but most lenders may require scores of 580 or higher
- 680 for jumbo loans
What credit score is needed to buy a house with no money down?
You generally don't need a down payment to take out a VA loan or USDA loan. So look into those options first if you think you may qualify. Conventional loans usually require at least 3% down.
Keep in mind that there may be other fees you have to pay at closing, such as closing costs or origination fees. So even if you find a loan with 0% down, there's a good chance you may have to pay something toward the loan.
Do you need all three credit scores to buy a house?
Because there are three credit bureaus in the U.S., it's quite common to have at least three different credit scores. Not only do these bureaus use different scoring models (which can result in different scores), but your lenders aren't required to report your information to every bureau. So you may find yourself in a situation where you only have one or two credit scores because there's not enough information in your credit file to generate all three.
In fact, Experian reports that over 45 million Americans have at least one file that can't be scored. So it's more common than you may think.
That said, you technically don't need all three credit scores to buy a house. However, the mortgage loan process may be more time-consuming without all three. This is because you may be required to provide more documentation so your lender can be assured that it has an accurate view of your finances. They may also need to do some digging into why you're missing certain scores.
What credit score is needed if you are self-employed?
The credit score you need to get a mortgage is generally the same regardless of if you're self-employed or salaried. However, you may have to provide more documentation to verify your income and prove you're a low-risk borrower. In some cases, you may also need a larger down payment.
Even though the credit score requirements may be the same, having a higher score is always better as it may offset the number of hoops you have to jump through to get a mortgage as a self-employed worker. It will also be a good way to secure the best mortgage rates.
What is the minimum credit score to buy a house?
There's technically no set minimum credit score to buy a house, but the rule of thumb tends to be 620.
That said, you may qualify for some loan types if your credit score is closer to 500, but you may have to meet stricter income or down payment requirements to get approved.
If your score is below 500, you may be better off increasing your score first before you apply for a mortgage.
Summary of our guide to what credit score is needed to buy a house
The credit score you need to buy a house depends on the type of loan you’re applying for, which lender you use, and how much you’ve saved up for a down payment. But in general:
- Conventional loans require a score of 620 or higher with at least 3% down.
- FHA loans may accept scores as low as 580 with 3.5% down or 500 with 10% down.
- USDA loans have a set minimum of 640, but you could get approved with a score as low as 600 if you go through manual underwriting.
- VA loans don’t have a set minimum, but most lenders want to see scores of 580 or higher.
- And lastly, jumbo loans have minimums of around 680 or higher.
If you have a low credit score, there are a few things you can do to try to raise it. These include paying your bills on time, keeping your balances low, and checking for errors on your credit report.
Cassidy Horton is a finance writer based in Seattle, Washington. With an MBA and a bachelor's in public relations, her work has been published over a thousand times by The Balance, Finder.com, Money Under 30, Clever Girl Finance, and many more. Cassidy is a self-confessed money nerd who’s passionate about helping people find financial freedom. Oh, and she really loves cats.