Credit scores typically range from 300 to 850, and borrowers within a certain range can qualify for mortgage loans. While you don't need a perfect 850 credit score to get the best mortgage rates, there are general credit score requirements you will need to meet in order to take out a mortgage. Show
Prospective home buyers should aim to have credit scores of 760 or greater to qualify for the best interest rates on mortgages. However, the minimum credit score requirements vary based on the type of loan you take out and who insures the loan. Of our list below, conventional and jumbo loans aren't insured by the government and often have higher credit score requirements compared to government-backed loans, like VA loans. Having a higher credit score makes a big difference in the amount of money you pay over the course of a loan. Borrowers with scores in the higher range can save thousands of dollars in interest payments over the life of a mortgage. Here are the minimum credit score requirements for several mortgage loans, using estimates from FICO. 1. Conventional loanMinimum credit score required: 620 Conventional mortgage loans aren't insured by a government agency, like the U.S. Department of Veteran Affairs or the U.S. Department of Agriculture. Instead, these loans follow standards set by government-sponsored mortgage loan companies, Fannie Mae and Freddie Mac. Conventional loans may be secured by one of these companies or a private lender. These loans are more affordable and require a minimum 620 credit score. Down payment amounts vary. Conventional loans are divided into conforming or non-conforming loans based on whether they "conform" or follow lending rules set by Fannie Mae and Freddie Mac. Conforming loans follow the standards set by these organizations, such as maximum loan amounts, while non-conforming loans may exceed those limits and are considered "jumbo" loans, which we discuss the credit requirements for next. 2. Jumbo loanMinimum credit score required: 680 A jumbo loan exceeds the maximum loan amount limits set by the Federal Housing Finance Agency. These loans aren't eligible to be insured by Fannie Mae or Freddie Mac, which means lenders take on more risk in the case you default on payments. Due to the larger loan amounts and riskier nature of these loans, borrowers need to meet higher credit score requirements of at least 680. Like conforming conventional loans, down payments vary. 3. FHA loanMinimum credit score required: 500 (with 10% down) or 580 (with 3.5% down) An FHA loan is insured by the Federal Housing Administration and an option for borrowers who are deemed a higher risk due to low credit scores and little money to put toward a down payment. The credit score requirements differ based on how much money you plan to put down. Borrowers with higher credit scores can qualify to make a lower down payment. Here's the breakdown:
Keep in mind that if you make a down payment less than 20%, lenders will probably require you to take out primary mortgage insurance (PMI) to cover the cost if you default. PMI can cost as low as 0.5% to upwards of 2% of your loan amount annually, according to Experian. 4. VA loanMinimum credit score required: None officially, though many lenders prefer 620 A VA (Veteran Affairs) loan is insured by the U.S. Department of Veteran Affairs and designed for eligible members of the military community and their spouses. This type of loan doesn't require a down payment. And while the VA doesn't set credit score requirements, most lenders will require a minimum 620 credit score. 5. USDA loanMinimum credit score required: None officially, though most lenders prefer 640 A USDA loan is insured by the U.S. Department of Agriculture and meant for low- to moderate-income home buyers. Similar to a VA loan, the USDA doesn't require a down payment and doesn't set a minimum credit score requirement. However, most lenders will require borrowers to have a 640 or greater credit score. Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party. What’s a good credit score to buy a house?The average credit score in the U.S. is about 714, according to Experian. That’s well within the range of what mortgage lenders consider to be “good.” In fact, most lenders see any FICO score above 680 as a good credit score to buy a house. Even if your credit is below the 680 mark, you may still be able to buy. It’s often possible to get a home loan with credit scores of 580 and up. So if your credit falls below the “good” mark, it’s still worth checking your home buying options. In this article (Skip to...)
How mortgage lenders view credit scoresFor mortgage lenders, credit scores fall into several categories or “tiers.” These credit tiers indicate the amount of risk associated with extending credit to home buyers. Most lenders use the following ranges to classify credit scores. FICO credit score tiers for home buyers:
As you can see, any score above 620 is technically considered “good” credit. Although scores of 680 and up usually see lower interest rates and other benefits. That doesn’t mean only good-credit borrowers can buy homes. There are mortgage loan options available for those in the “fair” and sometimes even “poor” credit ranges. So having a credit score that’s not “good” won’t necessarily stop you from buying a house. How a good credit score affects home buyingThe best way for lenders to predict whether you’ll pay your mortgage on time is by looking at how you’ve managed your debts in the past. Good credit scores communicate to lenders that you have a track record for properly managing your debts. For this reason, the higher your score, the better your chances of qualifying for a mortgage. In addition to having better odds of qualifying, there are other perks to having a good credit score when buying a house. These include:
All in all, lenders view borrowers with good credit as a lower risk. Banks can offer lower rates and charges for good-credit home buyers because there’s less probability they’ll lose money on the loan. As a buyer, having good credit could save you thousands of dollars in interest and PMI charges in the long run. So if your credit is on the lower end, it may be worth taking steps to improve your score before you apply to buy a home. Credit score requirements by loan programHome buyers and homeowners have a number of different mortgage programs from which to choose. Each one has its own minimum credit score requirements. In addition, each lender may set its own credit score requirement based on its tolerance for risk. While a score at or above 740 is ideal from your lender’s standpoint, you may qualify for a mortgage with a substantially lower credit score. Conventional loan: 620Conventional loans typically have the best mortgage rates and terms for good-credit borrowers. With a conventional loan, your score has a direct impact on your interest rate and loan fees. So the better your credit is, the cheaper your mortgage loan will be. Most lenders require a minimum credit score of 620 for a conventional mortgage and at least a 3% down payment. Some require higher scores. Conventional loans, also known as “conforming loans,” are mortgages that meet Fannie Mae and Freddie Mac’s guidelines. Conventional loans are the most common type of mortgage. FHA loan: 580FHA loans were originally designed to help low-to-moderate income mortgage borrowers, allowing for just 3.5% down, lower credit score requirements, and higher debt-to-income ratios. Technically, the Federal Housing Administration allows credit scores starting at 500-579 with 10% down. However, few lenders start at 500 in practice. Most FHA lenders want to see minimum scores between 580 and 600. VA loan: 580Backed by the Department of Veteran Affairs, VA loans are known to have some of the lowest mortgage rates available. In addition to flexible lending terms, VA loans require no down payment. The VA doesn’t have a set minimum score requirement. However, most lenders set their own score requirements that typically range from 580 to 600. USDA loan: 640U.S. Department of Agriculture loans are meant for properties located in rural areas. USDA loans offer 100% financing with lower interest rates as compared to conventional loans. Although the USDA does not set minimum credit score requirements, most lenders look for a minimum score of 620-640. Jumbo loan: 700Jumbo loans are mortgages that exceed conforming loan limits — currently $ in most parts of the U.S. Some lenders offer jumbo loans to mortgage borrowers with credit scores as low as 680, but most require 700 or higher. Jumbo loans are “non-conforming mortgages,” meaning they don’t conform to Fannie Mae and Freddie Mac’s guidelines. So lenders get to set their own jumbo loan requirements, and things like minimum credit score and minimum down payment can vary a lot from one bank to the next. Check your home buying eligibilityMost people know how important credit scores are when it comes to buying a house. But credit isn’t the only factor lenders consider when approving your home loan. They also look closely at your debt-to-income ratio, employment history, down payment, and any additional savings or investments. If your application looks strong in these other areas, it can help make up for a lower (or non-existent) credit score. Not sure about your qualifications? Check with a lender to find out if your credit score and full financial picture make you eligible to buy a house. The information contained on The Mortgage Reports website is for informational purposes only and is not an advertisement for products offered by Full Beaker. The views and opinions expressed herein are those of the author and do not reflect the policy or position of Full Beaker, its officers, parent, or affiliates. What is the best credit score to buy a house?It's recommended you have a credit score of 620 or higher when you apply for a conventional loan. If your score is below 620, lenders either won't be able to approve your loan or may be required to offer you a higher interest rate, which can result in higher monthly payments.
What is a qualifying credit score for a mortgage?The minimum credit score needed for most mortgages is typically around 620. However, government-backed mortgages like Federal Housing Administration (FHA) loans typically have lower credit requirements than conventional fixed-rate loans and adjustable rate mortgages (ARMs).
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What is the credit score range to buy a house
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