Inflation has cooled, the economy is growing and interest rates are a percentage point lower than this time last year. If you're planning to buy a house soon, your credit score will play a significant role in the mortgage interest rate you can expect and which loans you qualify for. A higher credit score can make you eligible for mortgage lenders’ lowest rates.
What credit score do you need to buy a house?
Your credit score is a snapshot of your credit report and is calculated using information about your payment history, credit history, type of debt and how much you owe. A good FICO credit score is 670 to 739, with the average score falling around 717.
Credit score requirements for a mortgage depend on the lender and type of loan you apply for.
Tip:
When you apply for a mortgage, your lender checks your credit via a hard credit inquiry, which can cause your score to drop temporarily, typically by a few points.
Minimum credit score requirements by loan type
Different types of mortgages have their own credit score requirements that determine your eligibility and loan terms. Below are the minimum credit score requirements for several common mortgage loans:
Conventional loans
A minimum credit score of 620 is generally required for conventional mortgage loans, though some lenders may have stricter score requirements. Lenders also consider other factors, such as your debt-to-income ratio (DTI) and down payment.
FHA loans
Backed by the Federal Housing Administration (FHA), these loans are popular among borrowers with lower credit scores or who are putting down a smaller down payment. To qualify for an FHA loan with a 3.5% down payment, you'll need a score of 580 or higher. However, you can qualify with a score as low as 500 with a 10% down payment.
VA loans
VA loans are mortgages backed by the Department of Veteran Affairs (VA). They’re available to eligible military service members, veterans and surviving spouses. VA loans are an attractive option for borrowers because they often come with competitive interest rates without down payment or private mortgage insurance requirements.
The VA doesn't set credit score requirements, but lenders typically prefer a minimum credit score of 620 unless the borrower is making a large down payment.
USDA loans
The U.S. Department of Agriculture (USDA) offers mortgage loans designed to boost homeownership in rural areas. USDA loans have no down payment requirements, but they do require mortgage insurance. The USDA doesn't set credit score requirements to qualify for a loan, so the minimum will depend on your lender. Some approved lenders require at least a 640 credit score for USDA loans, but others may accept a lower credit score.
Jumbo loans
Jumbo loans are a type of mortgage loan used for homes that exceed traditional loan limits. If the lender allows, you could get a jumbo loan for several million dollars.
Because jumbo loans are more costly, lenders typically have stricter borrower requirements. Many lenders require a credit score of 700 or higher to qualify for a jumbo loan, and they may require a 10% to 20% down payment.
The Federal Housing Finance Agency (FHFA) sets conforming loan limit values annually; in 2024, the conforming loan limit for most counties in the U.S. is $766,550. Jumbo loans don’t conform to that limit, allowing you to borrow above that amount.
How your credit score affects mortgage rates
Credit scores play a pivotal role in determining mortgage rates. Lenders use your score to assess your level of risk as a borrower. Generally, the higher your score, the more likely it is that you'll qualify for a lower rate. Qualifying for a lower interest rate means you'll pay less interest over the life of your loan.
Many lenders require a minimum score of 620 to qualify for a conventional loan. Most credit scoring models, such as FICO or VantageScore, have ranges of 300 to 850. A FICO score between 580 and 669 is considered fair. Borrowers with an exceptional credit score (a FICO score of 800 or higher) tend to receive the most competitive rates because they have a history of managing debt well.
Borrowers with lower credit scores can still qualify for a mortgage, but due to their higher lending risk, they are more likely to end up with a higher interest rate. Some lenders may require larger down payments or impose stricter terms for borrowers with lower credit scores.
How to improve your credit score before buying a house
There are several steps you can take to improve your credit score before applying for a mortgage:
- Pay your bills on time: Payment history accounts for 35% of FICO credit scores, more than any other factor. Making on-time payments each month helps build a positive payment history.
- Reduce your debt: Pay down debt and reduce your balances to lower your credit utilization rate, which is the amount of available credit you use.
- Avoid opening new accounts: Opening new credit accounts can temporarily lower your credit score. Taking on new debt can also increase your DTI, which is the amount of your gross monthly income that goes toward debt payments.
- Keep old accounts open: Closing old accounts may seem like a good idea, especially if you've paid off your balance. However, it will lower your credit age, another significant factor used to calculate credit scores.
- Check your credit: Before you apply for a mortgage, check your credit report and score. Make sure the information is accurate and dispute any errors you find. You can check your credit report for free at AnnualCreditReport.com.
Other factors lenders consider besides credit score
Your credit score is just one factor lenders rely on when determining eligibility and setting mortgage rates. Lenders will also consider:
- Your credit report
- Existing debt
- Savings
- Income
- DTI
- Total assets
- Whether they’ve done business with you before
Just as credit score requirements vary between loan types and lenders, other requirements for a mortgage loan also vary. Other factors that can affect your interest rate include your down payment amount, whether you choose a fixed or adjustable rate, the home price and its location.
What credit score is needed to buy a house FAQ
Can you get a mortgage with a bad credit score?
You can still qualify for certain types of mortgage loans, such as an FHA loan, with a credit score as low as 500. Lenders may require a large down payment and assign a higher interest rate if your credit score is low.
How long does it take to improve your credit score?
Improving your credit score can take months or years, depending on your current financial situation. Consistently paying bills on time, reducing existing debt and avoiding new credit inquiries can help expedite the process.
What is the best credit score to get a low mortgage rate?
A good-to-excellent credit score (670 or higher) generally qualifies borrowers for more competitive interest rates. Other factors, like your down payment amount, can affect the rate you'll receive from lenders.
Does checking your credit score lower it?
Checking your credit score doesn't hurt your score; it’s considered a soft credit inquiry and has no bearing on your credit score. A hard credit inquiry, on the other hand, occurs when you apply for a loan or pre-approval.
Are there any special programs for first-time homebuyers with low credit scores?
Government programs, like FHA, VA and USDA loans, offer favorable mortgage loan terms for individuals with lower credit scores. Because these loans are insured by a government agency, lenders often offer lower interest rates to borrowers who meet qualifications. Additionally, some state and local governments offer assistance programs tailored to first-time buyers.
Meet the contributor
Kevin Payne is a contributor to Buy Side from WSJ and personal finance expert specializing in credit cards, student loans and travel.