If you’re starting to think seriously about buying a home, you’ve probably asked yourself an important question: what credit score is needed to buy a house? It’s certainly a wise thing to consider early in the process. Your credit score—specifically your FICO® score—plays a meaningful role in whether you qualify for a mortgage and what your loan terms might look like if you do. Lenders use it as a helpful snapshot of how you’ve handled credit in the past and how likely you are to make consistent and on-time home loan payments in the future.
While there isn’t a strict credit score standard that applies to all lenders and loan types, there are baseline scores that are recommended or required for different kinds of mortgages. These minimums can serve as starting points for you as you prepare to apply for a home loan, and being aware of them may help you feel more confident in the process. In this article, we’ll review how your credit score can impact your home loan, the basic standards for different loan types, and ways you can improve or maintain your score.
Why are credit scores important to buying a house?
Before diving into numbers and loan programs, it helps to understand what a credit score actually represents. A credit score is a three-digit number, usually ranging from 300 to 850, that identifies your risk level as a borrower, i.e., how likely you are to repay your debts. Mortgage companies and other lenders use it as a factor in deciding whether to lend you money, as well as the terms and conditions they’ll require (interest rate, fees, etc.). There are different scoring systems for determining a credit score, but most lenders use the FICO system.
Because a mortgage is a long-term commitment, home loan lenders want reassurance that borrowers can manage monthly payments consistently. A higher credit score doesn’t just improve your chances of approval; it can also influence your interest rate, down payment requirements, and overall loan costs. Even a small difference in your interest rate can add up to thousands of dollars over the life of a loan, which is why credit scores tend to get so much attention during the homebuying process.
Scores by loan types
But what credit score is needed to buy a house and receive favorable loan terms? The answer to that question is a bit more complicated. Let’s explore typical standards for the most common loan types.
FHA loans
Federal Housing Administration (or FHA) loans are backed by the federal government. To qualify for the lowest minimum down payment for this type of loan—3.5% of the home’s total sales price—the government requires a credit score of at least 580.
However, it’s important to bear in mind that the government doesn’t actually fund FHA loans; private lenders do (like our affiliate, HomeAmerican Mortgage Corporation). The government’s role is to insure a lender against loss if a buyer defaults on the loan. So what does that have to do with your credit score? Well, since private lenders supply their own funds, they get to set the final criteria for buyers attempting to qualify for an FHA loan. This means they could potentially require a higher minimum credit score than the government. Some lenders may even qualify you for an FHA loan with a credit score of less than 580, but they could require larger down payment. That decision would be based on your overall credit profile.
Conventional loans
Unlike FHA loans, Conventional mortgages are not obtained under a government insured or guaranteed program. Instead, banks, credit unions, online originators, and other private lenders offer them, and they often follow guidelines set by Fannie Mae and Freddie Mac. Because of this, Conventional loans generally have stricter credit score requirements than other loan types. Most lenders ask for a score of at least 620, but score requirements may vary depending on who issues your loan.
If your credit score is on the lower end of the acceptable range, you may still qualify, but you could face higher interest rates or Private Mortgage Insurance (PMI) costs.
VA loans
If you are an active-duty member or veteran of the United States military, you may be eligible for a Department of Veterans Affairs (VA) loan backed by the U.S. government. VA loans offer a range of attractive benefits to homebuyers, including little to no required down payment, no Private Mortgage Insurance (PMI) conditions, and limited closing costs. Like FHA loans, VA mortgages are guaranteed by the U.S. government but offered by private lenders. While the VA doesn’t set a minimum credit score requirement, your lender may establish a perquisite score.
USDA loans
The U.S. Department of Agriculture (USDA) guarantees loans for eligible low- to moderate-income applicants in rural areas. According to the USDA, there is no government-set credit score requirement for this loan program, “but applicants are expected to demonstrate a willingness and ability to handle and manage debt.” Additionally, your lending company may require a minimum score, with 640 being a standard benchmark.
Borrowers with scores below that number may still qualify with additional documentation or other prerequisites. It’s important to note that USDA loans also tend to have income limits and geographic requirements that will impact your eligibility potential.
How to improve or maintain your credit score
Once you learn what credit score is needed to buy a house—that is, the general standards for different loan types—you can evaluate how your own score compares. If your credit score isn’t quite up to par yet, or if it is and you just want to avoid any surprise changes, here are a few tips for increasing or maintaining your score:
- Pay your bills on time (or even early!). Payment history is one of the most influential factors in your credit score. Making on-time payments every month shows lenders that you can manage obligations responsibly. Consider setting up automatic payments or calendar reminders to help prevent missed due dates.
- Avoid applying for or opening any new accounts until after you close on a home. When you apply for credit, a hard inquiry typically appears on your credit report. Too many inquiries in a short period can temporarily lower your score, so it’s wise to hold off on a new credit card or car loan until after those house keys are in your hands.
- Keep old accounts open, even if you pay them off. The length of your credit history matters. Even if you’ve paid off an older account, keeping it open can help maintain a longer average credit age, which may support your score.
- Save major purchases for later, unless you know you can quickly pay your balance down or in full. Keep your credit utilization (the percentage of your total available credit that you’re currently using) low, ideally at 30% or less. Large purchases that you can’t pay off immediately could cause your utilization number to jump up.
- Monitor your credit on a regular basis and report any errors. Errors on credit reports are more common than many people realize. Reviewing your reports from all three major bureaus allows you to spot mistakes early and dispute them if needed.
- Take care of major credit tasks before you start the home loan application process. Never underestimate the power of planning ahead. Addressing credit issues well in advance of applying for a mortgage gives you more time to see positive results.
Other factors to consider
It’s important to remember that your credit score is only one piece of the homebuying puzzle. Your mortgage lender will look at your financial health as a whole when determining whether or not to approve your loan application. They’ll likely consider elements such as:
- Your current income
- Your employment history
- Your credit history (which will also directly impact your credit score)
- Your debt-to-income ratio (DTI), which is essentially the percentage of your income that goes toward debt payments
- Your savings and assets (investments, retirement accounts, etc.)
- Your financial behavior (how you use credit, your payment history, etc.)
All that’s to say, be sure to optimize your entire financial picture when preparing to buy a home, rather than solely focusing on your credit score.
Bringing it all together
To summarize, there isn’t a simple answer to “what credit score is needed to buy a house?” The number depends on a variety of factors, including the loan type, lender requirements, and your broader financial situation. While scores of 620 or higher could open the door to Conventional loan options, government-backed programs like FHA, VA, and USDA loans may offer more flexibility for buyers with lower scores.
The key takeaway here is that credit scores are important, but they don’t tell the whole story. By understanding how your score fits into the bigger picture and taking steps to strengthen your financial profile, you can position yourself for a smoother homebuying experience.
Ready to get the homebuying process rolling? Fill out a short pre-qualification form with HomeAmerican Mortgage Corporation and one of their experienced professionals will review your information!
For additional tips and information:
- Eight Tips for How to Afford a House
- Eight Financial Wellness Tips to Help You Land Your Dream Home
- Why Did My Credit Score Drop: Possible Reasons & Solutions
- How to save for a down payment: 4 tips
8 Credit Score Management Tips
Applying for a mortgage soon? Our 8 Credit Score Management Tips could help put you on the path to better rates!
