What Credit Score Do I Need for a Mortgage?

What credit score do you need to buy a house? 


While a lot of people think you need a perfect credit score to get a mortgage, that couldn’t be further from the truth. This may surprise you, but you don’t need a good credit score to buy a house. In fact, many people are able to buy homes with just fair credit. The minimum credit score to get a mortgage is 580, which would be considered “fair credit” according to your FICO Score.


While mortgage lenders do look at your credit report, it’s not the only factor that plays a role in whether you get approved for a home or not. Lenders look at a number of different things, also look such as your debts, down payment, and income to debt ratio. If these other areas are strong, your credit scores will have less of an influence in the overall scheme of things.


Now, your credit score is important, you do want to aim to get the highest credit score possible. If you want to learn more about credit reports and credit scores, be sure to check this out: Understanding Credit Reports And Credit Scores


If you do have lower credit, you’ll likely pay a higher interest rate. Many buyers with low scores choose to buy now and refinance for a better rate when their credit improves later on.


Minimum Credit Scores By Mortgage Program


The credit score you’re going to need to buy a house will depend on the exact type of loan you apply for. Just to give you a base to work from, here’s the minimum credit requirements for the five major loan options range from 580 to 680.


  • FHA Loan – 580 minimum FICO score
  • Conventional Loan – 620 minimum FICO score
  • VA Loan – 620 minimum score is typical (varies by lender)
  • USDA Rural Housing Loan – 640 minimum FICO score
  • Jumbo Loan – 680 minimum FICO score (used in real-estate)


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Credit Score Needed For A First-Time Home Buyer


If you’re a first-time home buyer, you can apply for a FHA loan, which requires most individuals to have a 580 FICO score. We do know that some people have been approved for FHA loans with less than 580 FICO scores. However, if your credit score is below 580, you may need a 10% down payment to qualify. If you have a credit score over 580, you only need 3.5% down for an FHA mortgage.


Other Requirements To Buy A House 


While your credit score is important to get a mortgage, there’s other factors you’ll need to think about. There’s much more than just credit minimums, of course (which is why underwriting guidelines comprise hundreds of pages).


In addition to credit scores, lenders evaluate borrowers based on:


  • Down Payment – Most of the loan programs available require at least a 3% down payment.
  • Income and Employment History – Most lenders want to see at least 2 years of steady income and employment, perhaps more if you’re self-employed or a freelancer.
  • Savings – You do want to have cash put back to cover your down payment, closing costs, and often cash reserves.
  • Existing Debts – Your debt-to-income ratio compares pre-existing debts like student loans, auto loans, and credit card minimum payments against your monthly gross income. The lower your DTI, the better
  • Loan Amount – If you have lower credit, your loan amount will likely need to be within FHA loan limits or conforming loan limits


If your credit score is low but you have steady income, a large amount of money in savings, and a manageable debt load, you could get approved for a mortgage. You have a good chance to get a loan approval if your credit scores are high but you’re only average in those other areas.


Remember, you don’t have to be perfect in every area to get an approval. Understand, lenders are going to look at your full application, not just your credit score.


What Is Good Credit Score For A Mortgage? (Header Requirement)


While it’s possible to buy a home with just fair credit, you’ll get a lower mortgage rate and better loan terms with a higher credit score. Trust us, the higher you can get your credit score, the better.


The question; “what’s considered “good” credit for a mortgage? We recommend starting with FICO’s credit tiers as a starting point. FICO is the standard scoring model used by mortgage lenders, so that choice makes the most sense.


Here’s FICO’s credit tiers, ranging from exceptional credit to poor credit.


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


The good news, you don’t need the highest FICO credit tier to get a prime mortgage rate. Most home buyers don’t have credit anywhere near that 800-850 level.


In 2020, the average credit score for closed mortgage loans was just under 750.

Two of the biggest lenders, Fannie Mae and Freddie Mac, give the best rates to borrowers with scores above 740. Mortgage lenders know that perfect credit is tough to have, most are likely not expecting you to have high 800 scores.


Is My Credit Score High Enough To Buy A House? 


Bottom line, If your credit score is above 580, you have a chance to get a mortgage. Your odds of getting approved for a home rise the higher your credit score goes.


Still, don’t forget, your credit score is only a part of the full equation. A lender also needs to approve your income, employment, savings, and debts, as well as the location and price of the home you plan to buy.


To find out whether you can buy a house and how much you can get approved to borrow, make sure you get pre-approved by a mortgage lender. This can usually be done online for free, and it will give you a verified answer about your home buying prospects. Good luck!


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