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In a nutshell
Buying a home becomes much easier when you have your financial ducks in a row ahead of time. You can boost your approval odds for the home you want if you save up a hefty down payment amount, pay down your existing debt to improve your debt-to-income ratio (DTI) and show strong, consistent income on your mortgage application.
- Your credit score is another major factor that can make or break your home purchase — or at least limit the type of home loan you can be approved for. Having a higher credit score can also help you qualify for a lower interest rate, which can lead to considerable interest savings as you pay off your home.
- Most lenders want to see a credit score of at least 620 when you apply for a mortgage, but some loan programs have lower minimum requirements.
- Your credit score can also determine the minimum down payment you need to purchase a home.
What is a good credit score to buy a house?
A good credit score can help you qualify for more types of home loans with better mortgage rates and terms. Generally speaking, most conventional mortgage lenders need to see a credit score of at least 620 to approve you for financing. However, some types of home loans approve borrowers with credit scores as low as 500 if other conditions are met.
Note: A good credit score to buy a house isn't all you need to qualify for a home loan; factors like your income, employment and how much debt you have also affect your loan approval. The down payment you need to buy a home varies by loan type and having a lower credit score can increase the amount of money you need to put down, in some cases.
Credit score needed to buy a house by loan type
By and large, the credit score you need for a home purchase depends on the type of mortgage you want and can qualify for. For example, some borrowers are eligible for certain government-backed loans if they’re military borrowers or if they want to buy a rural property.
The chart below shows the minimum credit score and down payment amounts required for different loan types.
| Mortgage type | Best for | Minimum down payment | Minimum credit score |
|---|---|---|---|
Conventional | Borrowers with good credit, stable income, employment and some down payment funds | 3% to 5% | 620 |
Federal Housing Administration (FHA) loan | Borrowers with lower credit scores and little cash saved for a down payment | 3.5% to 10% | 580 (at 3.5% down); 500 (at 10% down) |
Department of Veterans Affairs (VA) loan | Active-duty military service members, veterans or certain eligible spouses | No down payment required | No industry standard, but many lenders want to see a score of 620 or higher |
U.S. Department of Agriculture (USDA) loan | Borrowers purchasing a home in a USDA-eligible rural area | No down payment required | No industry standard, but many lenders want to see a score of 620 or higher |
As you can see, you'll need to put down 3% to 5% to qualify for a conventional mortgage in most cases. With FHA loans, on the other hand, your minimum down payment depends on your credit score.
If you're a first-time homebuyer who wants to purchase a home with an FHA loan and you have a credit score of at least 500 — but less than 580 — you'll need to come up with a 10% down payment. Meanwhile, having a credit score of 580 and above can help you put just 3.5% down with an FHA loan. Keep in mind, though, that FHA-approved lenders may have higher credit score minimums.
While the VA and USDA don’t set minimum credit score requirements for those loans, approved lenders usually do. You typically need a credit score of at least 620 to qualify for these mortgages, and that's after you meet other borrowing guidelines.
How your credit score affects your mortgage rate
Meeting the minimum credit score requirement for a home loan doesn't necessarily mean you'll qualify for the best rates and terms. Instead, the minimum score is what you need for preapproval, and it will be taken into account along with other factors, like your income and other debts.
Major credit scoring models like FICO and VantageScore use a credit score range of 300 to 850, and scores that are well above the minimum can lead to considerable financial savings. Using the FICO scoring model, for example, a credit score of 670 or higher is considered "good" and may lead to qualifying for the best mortgage rates. However, a credit score of 740 or higher is considered "very good" and a score of 800 or higher is considered "exceptional."
How great is the difference based on your credit score? According to the Fair Isaac Corporation (FICO), someone with a credit score of 760 to 850 could qualify for an APR of 6.359% on a 30-year, fixed-rate mortgage based on today's rates, whereas someone with a score of 620 to 639 might pay an 7.948% APR instead.
Here's how these numbers shake out in terms of the monthly mortgage payment (principal and interest) and total interest paid over a 30-year term for a $350,000 home loan.
| 760 to 850 credit score | 620 to 639 credit score | |
|---|---|---|
Mortgage APR | 6.359% APR | 7.948% APR |
Monthly payment | $2,179.88 | $2,555.50 |
Total interest paid | $434,757.99 | $569,979.92 |
The chart above reveals how a lower credit score can cost you in the long run. With a credit score of 620 to 639 in this example, you’d pay almost $135,222 more in interest throughout a 30-year home loan compared to someone with a credit score of 760 or higher.
The monthly payment is also $375.62 higher with a lower credit score, which might impact how much money you can borrow in the first place. Mortgage lenders base affordability on how much of your gross monthly income goes towards monthly debt payments (including your new housing payment), and most want to see a total DTI ratio of 43% or less.
Tips to increase your credit score before buying a house
Taking steps to improve your credit score now is a smart move no matter what type of mortgage you plan to apply for in the future. After all, a higher credit score can help you qualify for more types of home loans, as well as a lower interest rate and better loan terms.
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To help you boost your credit score before you apply for a mortgage, here are some tips to follow:
- Apply for a credit-building product: If your credit score needs work or is below the "fair" range of 580 to 669, using a credit-building product like a secured credit card or a credit-builder loan responsibly could improve it.
- Check your credit reports for errors: Look over your credit reports with the three credit bureaus — Experian, Equifax and TransUnion — to check for errors. You can do this for free at AnnualCreditReport.com. If you find errors, take steps to dispute the information.
- Keep the cards and accounts you have: Keeping old accounts you have open can increase the average length of your credit history and boost your score. Opening new accounts can hurt your credit score in the short term, though, so keep the accounts you already have and avoid opening new ones if possible.
- Pay your bills on time: The most important factor that makes up your credit score is your payment history, so you can't afford to miss a payment when you're trying to build your credit. Pay all your bills early or on time, even if you have to set them up on auto-pay or put due dates into your calendar as a reminder.
- Pay down debt: How much debt you owe compared to your credit limits (known as your credit utilization rate) also affects your credit score. Most experts recommend keeping this amount below 10% of your available credit (30% at the maximum). Paying down revolving debt like credit card balances can help tremendously in this category.
The AP Buyline roundup
The credit score you need to buy a house could be as low as 500, but you'll qualify for a lower down payment amount and better mortgage rates and terms if you can improve your score first. If you're able to get your credit score above 620 before you apply for a mortgage, you might qualify for a conventional home loan.
Having a credit score of 670 or higher could also help you qualify for a lower interest rate, leading to considerable financial savings over time. Take steps to improve your credit now — while you still have time — if you plan to purchase a home in the future. If you get your credit score into the "good" or "very good" range while you work on saving up for a down payment, your future self will thank you.
Frequently asked questions (FAQs)
Can I get a mortgage with a low credit score?
It's possible to get a mortgage with a credit score as low as 500, although the type of home loan you can qualify for will be limited and many lenders have higher credit score minimums. For example, you may be able to get an FHA loan with a credit score of 500 if you put down at least 10% of the home’s purchase price.
Will I get a better deal on a mortgage with a higher credit score?
A higher credit score can help you qualify for lower interest rates when you apply for a mortgage. Lower rates also mean lower monthly payments and lower interest costs over the life of the loan.
What is a decent credit score to buy a house?
Most lenders want to see a credit score of 620 or higher when you apply for a home loan. Additionally, having a higher credit score can give you access to lower down payment requirements, lower interest rates and other competitive loan terms.
AP Buyline’s content is created independently of The Associated Press newsroom. Our evaluations and opinions are not influenced by our advertising relationships, but we might earn commissions from our partners’ links in this content. Learn more about our policies and terms here.