What Credit Score Is Needed To Buy A House?

Your credit history is important in qualifying for a mortgage to buy a house. That credit history and your credit habits are summarized by your credit score (FICO Score), so that number is critical when you are looking to buy a home.

What Credit Score Is Needed To Buy A House?

In general, you will need a credit score of at least 500-720 to buy a house, depending on the type of mortgage you seek and the amount you are looking to borrow.

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Why such a broad range? It’s because different types of loans have different minimum credit score requirements to qualify.

Let’s look at each of the different types of loans – keeping in mind that each of the credit scores shown is a minimum required to qualify for that type of loan – higher is better.

Minimum Credit Scores To Get A Mortgage:

• Conventional Mortgage: 620
• FHA Loan, with at least a 10% down payment: 500
• FHA Loan, with at least a 3.5% down payment: 580
• VA Loan: 600-640
• USDA Loan: 640
• Jumbo Loan: 740

Minimum Credit Score To Get A Conventional Mortgage

The minimum credit score to get a conventional mortgage loan is 620, but many mortgage lenders look for higher scores in order to qualify.

Minimum Credit Score To Get A FHA Loan

You can qualify for an FHA loan with a credit score as low as 500, but in order to get a loan with a credit score between 500 and 579, you will have to make a down payment of at least 10%.

To qualify for an FHA loan with a 3.5% down payment, your credit score will need to be 580 or above.

Be aware, however, that most FHA lenders will require major issues on your credit report (the things that cause your credit score to be so low) to be fixed before approving a loan at these low credit scores. For example, if you have unpaid debts in collections, liens and judgments, you will probably have to pay them off before you are able to qualify for an FHA (or, frankly, almost any) loan.

Minimum Credit Score To Get A VA Loan

VA loans, available to U.S. military veterans and their surviving spouses, don’t have a government-mandated minimum credit score. Some online VA lenders tend to set their own minimums at levels somewhere between 620 and 640.  If you credit score is under 620, and you’ve been told NO, you CAN qualify for a mortgage – Find an Expert in your area for a second opinion.

Minimum Credit Score To Get A USDA Loan

There is no mandatory minimum credit score to qualify for a USDA loan. However, if your credit score is 640 or above, you will qualify to receive faster approval of your loan.

Minimum Credit Score To Get A Jumbo Loan

Jumbo loans are a special kind of loan for big mortgages where you are borrowing more than a set amount, called the conforming limit. Lenders usually require credit scores of at least 700 to qualify for these loans, but oftentimes are looking for better financial standing in their borrowers, so would prefer credit scores of 740 or above.

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Need To Improve Your FICO Score? What Goes Into Your Credit Score Calculation?

You probably don’t realize it, but you potentially have dozens of different credit scores, from different vendors and for different purposes. But, one of the most frequently used scores, the FICO Score is based on the following factors:

Your Payment History – 35% of your score

The most important element of your FICO score is your history of paying your bills on time. It’s a little thing, certainly no big deal, to pay your bills a few days late, right? Wrong! Be aware that every time you pay a bill late that gets reported to FICO, that puts a black mark on your credit that can stay there for up to 7.5 years!

Amount Owed – 30% of your score

This portion of your score is not looking so much at how much you owe, but how much you owe in relation to how much you could borrow. Think of this in relation to your credit limit on a credit card. If you have a $5000 credit limit but have a balance of $1500, the credit reporting agencies view this as far better than having a $2000 credit limit with that same balance of $1500. In both cases, you owe the same amount, but the percentage of your available credit you have used is significantly higher on the account with the $2000 credit limit. This percentage is called your credit utilization and it’s good to have it be low. Ideally, you’ll never let the amount you owe go above 30% of your credit limit on any account and in total.

Length Of Credit History – 15% of your score

In general, having a longer credit history will give you a higher FICO score. FICO looks at the age of your oldest credit account, the average age of all your credit, and the average age of all your accounts. 

However, they also realize that this scoring system blocks out those who are new to the world of credit, so the algorithm accounts for that.

FICO also looks at how long it’s been since you used certain accounts and looks at how long you have had certain types of accounts.

Credit Mix – 10% of your score

Banking experience has shown that those who have a mixture of different types of credit accounts: credit cards, finance company accounts, store accounts, and mortgages tend to be less likely to default on their loans, so give extra credit to accounts that have several different types of credit accounts.

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New Credit Accounts – 10% of your score

Bankers have also found that people who are struggling financially tend to apply for more credit accounts, oftentimes several in a short period of time. This is even more of a negative signal if you have a limited credit history. FICO reduces your score when they see that happen.

Protect Your Credit Score

As you can see from this article, the lower your credit score, the fewer options you have in life. It’s important to learn about the basics of credit, work to improve your credit score, and adhere to solid financial habits to preserve and build it over time.

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Have Questions About Qualifying for a Mortgage?

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