Strictly speaking, you don’t need a credit score to buy a house. If you’re paying cash, no one necessarily cares if you have good credit. However, if — like most aspiring American homeowners — you’ll need financing, then a credit score is a concern.
Your credit score is one of the most important factors lenders consider when you apply for a house. Not just to qualify for the loan itself, but for the conditions. Typically, the higher your score, the lower the interest rates and better terms you’ll qualify for.
So, what is a good credit score to buy a house? It depends on the type of mortgage you’re seeking: Federal Housing Administration (FHA) loans, conventional loans, and jumbo loans all vary when it comes to the credit score needed to buy a house. Generally speaking, you’ll likely need a credit score of at least 620 — what’s classified as a “fair” rating — to qualify with most lenders. If you opt for an Federal Housing Administration (FHA) loan, you might be able to get approved with a credit score as low as 500.
Credit score needed to buy a house by mortgage type
There’s no single, specific credit score that’ll automatically qualify you for a mortgage (though having the maximum 850 score never hurts). But while they don’t set precise qualifying numbers, lenders do have minimum credit score requirements.
Type of loan
- Conventional loans: Conventional loans are mortgages that aren’t offered or backed by a U.S. government agency; they’re offered by commercial banks and savings and loans associations. Generally, the higher your credit score, the more likely you’ll qualify for a mortgage loan with these lenders. Many will accept a credit score as low as 620, but they may have other requirements for those borrowers, such as a higher income or a larger down payment.
- FHA loans: The Federal Housing Administration guarantees loans geared toward borrowers with lower credit scores and low down payments, especially first-time homebuyers. You could qualify for an FHA loan with a credit score of 500 to 579 with a 10 percent down payment, or with a 3.5 percent down payment if your score is 580 or higher.
- USDA loans: The U.S. Department of Agriculture backs the USDA loan program for low- to moderate-income borrowers purchasing a home in a rural area. Borrowers generally need a minimum score of 640 to qualify for a USDA loan. In some cases, USDA lenders may consider a lower score with additional analysis of a borrower’s credit.
- VA loans: Backed by the U.S. Department of Veterans Affairs, VA loans are offered to active and veteran military personnel and their families. The government doesn’t have a minimum credit score requirement to qualify for VA loans, though many lenders — who actually extend the financing — require a minimum score of 620.
- Jumbo loans: Jumbo loans are larger-than-normal-size mortgages; they exceed the conforming loan limits established by Freddie Mac and Fannie Mae — currently $647,200 in most markets. Many jumbo lenders require a credit score of 700 or higher to qualify because of the increased risk that comes with borrowing such a large amount.
What is a good credit score for buying a house?
When considering the best credit score to buy a house, many lenders use the FICO (Fair Isaac Corp.) model for credit scores. It grades consumers on a 300- to 850-point range, with a higher score indicating less risk to the lender.
- 800 or higher: Exceptional
- 740-799: Very good
- 670-739: Good
- 580-669: Fair
- 579 or lower: Poor
How your credit score affects your mortgage rate
Although it’s up to specific lenders to determine what score borrowers need to be offered the lowest interest rates, sometimes even a difference of a few points on your credit score can affect your monthly payments substantially. For example, the difference between a 3.5 percent interest rate and a 4 percent rate on a $200,000 mortgage is $56 per month. That’s a difference of $20,680 over a 30-year mortgage term.
“A low credit score can make it less likely that you would qualify for the most affordable rates and could even lead to rejection of your mortgage application,” says Bruce McClary, spokesperson for the National Foundation for Credit Counseling. “It’s still possible to be approved with a low credit score, but you may have to add a co-signer or reduce the overall amount you plan to borrow.”
A co-signer would be responsible for the debt, however, so it’s not always easy to get someone to agree. Plus, if you miss payments, it could damage your co-signer’s credit — and your relationship with them.
These examples are based on national averages for a 30-year fixed mortgage loan of $300,000
|FICO Score||APR*||Monthly Payment||Total Interest Paid||Price Changes|
|760-850||4.835%||$1,580||$268,926||If your score changes to 700-759, you could pay an extra $14,610|
|700-759||5.057%||$1,621||$283,535||If your score changes to 760-850, you could save an extra $14,610|
|680-699||5.234%||$1,654||$295,310||If your score changes to 700-759, you could save an extra $11,775|
|660-679||5.448%||$1,694||$309,693||If your score changes to 699-680, you could save an extra $14,383|
|640-659||5.878%||$1,775||$339,068||If your score changes to 660-679, you could save an extra $29,375|
|620-639||6.424%||$1,881||$377,244||If your score changes to 640-659, you could save an extra $38,177|