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Founded in 1976, Bankrate has a long track record of helping people make smart financial choices. We’ve maintained this reputation for over four decades by demystifying the financial decision-making process and giving people confidence in which actions to take next. Bankrate follows a strict , so you can trust that we’re putting your interests first. All of our content is authored by and edited by , who ensure everything we publish is objective, accurate and trustworthy. Buying or selling a home is one of the biggest financial decisions an individual will ever make. Our real estate reporters and editors focus on educating consumers about this life-changing transaction and how to navigate the complex and ever-changing housing market. From finding an agent to closing and beyond, our goal is to help you feel confident that you're making the best, and smartest, real estate deal possible. Bankrate logo Editorial integrity
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Bankrate’s editorial team writes on behalf of YOU – the reader. Our goal is to give you the best advice to help you make smart personal finance decisions. We follow strict guidelines to ensure that our editorial content is not influenced by advertisers. Our editorial team receives no direct compensation from advertisers, and our content is thoroughly fact-checked to ensure accuracy. So, whether you’re reading an article or a review, you can trust that you’re getting credible and dependable information. Bankrate logo How we make money
You have money questions. Bankrate has answers. Our experts have been helping you master your money for over four decades. We continually strive to provide consumers with the expert advice and tools needed to succeed throughout life’s financial journey. Bankrate follows a strict , so you can trust that our content is honest and accurate. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The content created by our editorial staff is objective, factual, and not influenced by our advertisers. We’re transparent about how we are able to bring quality content, competitive rates, and useful tools to you by explaining how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and, services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range can also impact how and where products appear on this site. While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service. Strictly speaking, you don’t need a credit score to buy a house. If you’re , no one necessarily cares if you have good credit. However, if — like most aspiring American homeowners — you’ll need financing, then a credit score is a concern. Your credit score is one of the most important factors lenders consider when you . Not just to qualify for the loan itself, but for the conditions. Typically, the higher your score, the lower the interest rates and better terms you’ll qualify for. So, what is a good ? It depends on the type of mortgage you’re seeking: Federal Housing Administration (FHA) loans, conventional loans, and jumbo loans all vary when it comes to the credit score needed to buy a house. Generally speaking, you’ll likely need a credit score of at least 620 — what’s classified as a “fair” rating — to qualify with most lenders. If you opt for an Federal Housing Administration (FHA) loan, you might be able to get approved with a credit score as low as 500. Credit score needed to buy a house by mortgage type
There’s no single, specific credit score that’ll automatically qualify you for a mortgage (though having the maximum 850 score never hurts). But while they don’t set precise qualifying numbers, lenders do have minimum credit score requirements. The minimum credit score to be eligible for a mortgage depends on the and lender. Loan Type Minimum Credit Score Conventional loans 620 FHA loans 500 (with 10% down payment) 580 (with 3.5% down payment) USDA loans 640 VA loans 620 Jumbo loans 700 : Conventional loans are mortgages that aren’t offered or backed by a U.S. government agency; they’re offered by commercial banks and savings and loans associations. Generally, the higher your credit score, the more likely you’ll qualify for a mortgage loan with these lenders. Many will accept a credit score as low as 620, but they may have other requirements for those borrowers, such as a higher income or a larger down payment. : The Federal Housing Administration guarantees loans geared toward borrowers with lower credit scores and low down payments, especially . You could qualify for an FHA loan with a credit score of 500 to 579 with a 10 percent down payment, or with a 3.5 percent down payment if your score is 580 or higher. : The U.S. Department of Agriculture backs the USDA loan program for low- to moderate-income borrowers purchasing a home in a rural area. Borrowers generally need a minimum score of 640 to qualify for a USDA loan. In some cases, USDA lenders may consider a lower score with additional analysis of a borrower’s credit. : Backed by the U.S. Department of Veterans Affairs, VA loans are offered to active and veteran military personnel and their families. The government doesn’t have a minimum credit score requirement to qualify for VA loans, though many lenders — who actually extend the financing — require a minimum score of 620. : Jumbo loans are larger-than-normal-size mortgages; they exceed the conforming loan limits established by Freddie Mac and Fannie Mae — currently $647,200 in most markets. Many jumbo lenders require a credit score of 700 or higher to qualify because of the increased risk that comes with borrowing such a large amount. What is a good credit score for buying a house
When considering the best credit score to buy a house, many lenders use the FICO (Fair Isaac Corp.) model for credit scores. It grades consumers on a 300- to 850-point range, with a higher score indicating less risk to the lender. 800 or higher: Exceptional 740-799: Very good 670-739: Good 580-669: Fair 579 or lower: Poor How your credit score affects your mortgage rate
Although it’s up to specific lenders to determine what score borrowers need to be offered the lowest , sometimes even a difference of a few points on your credit score can affect your monthly payments substantially. For example, the difference between a 3.5 percent interest rate and a 4 percent rate on a $200,000 mortgage is $56 per month. That’s a difference of $20,680 over a 30-year mortgage term. “A low credit score can make it less likely that you would qualify for the most affordable rates and could even lead to rejection of your mortgage application,” says Bruce McClary, spokesperson for the National Foundation for Credit Counseling. “It’s still possible to be approved with a low credit score, but you may have to add a co-signer or reduce the overall amount you plan to borrow.” A co-signer would be responsible for the debt, however, so it’s not always easy to get someone to agree. Plus, if you miss payments, it could damage your co-signer’s credit — and your relationship with them. Here’s how much you’d pay at the current rates (as of August 2022) for each credit score range. These examples are based on national averages for a 30-year fixed mortgage loan of $300,000. FICO Score APR* Monthly Payment Total Interest Paid Price Changes 760-850 4.835% $1,580 $268,926 If your score changes to 700-759, you could pay an extra $14,610 700-759 5.057% $1,621 $283,535 If your score changes to 760-850, you could save an extra $14,610 680-699 5.234% $1,654 $295,310 If your score changes to 700-759, you could save an extra $11,775 660-679 5.448% $1,694 $309,693 If your score changes to 699-680, you could save an extra $14,383 640-659 5.878% $1,775 $339,068 If your score changes to 660-679, you could save an extra $29,375 620-639 6.424% $1,881 $377,244 If your score changes to 640-659, you could save an extra $38,177 *APRs as of Aug. 1, 2022 Source: Bankrate’s is a handy tool to help you see interest rates for credit scores. You can also use Bankrate’s to run the numbers and see what your monthly mortgage payment might look like with different APRs. Why your credit score matters to lenders
Your credit score helps lenders determine your ability or inability to repay the mortgage (and, subsequently, their risk). Lenders also examine your , the percentage of monthly debt obligations relative to how much income you bring in. To illustrate, if you earn $4,000 per month, and have $1,250 in credit card, loans, housing and other payments, your DTI ratio would be 31 percent. The , though some lenders will accept more with a higher down payment. Can I get a mortgage with a low credit score
It is possible to , but you’ll pay higher interest rates and higher monthly payments. Lenders may be more stringent about other aspects of your finances, such as your DTI ratio, if your credit is tarnished. Keep in mind that credit requirements vary from lender to lender. to find one that will work with you. How to improve your credit score to buy a house
Before you look at houses, it’s smart to and pull your credit reports from the . Addressing credit issues early on can help you raise your score before you apply for a mortgage. If your credit score isn’t great, there are still options. Instead of settling for the mortgage rates you currently qualify for, consider postponing homeownership and working to boost and improve your options. Here are some quick tips to help: 1 Check your credit report and correct any errors
Before applying for a mortgage, request a copy of your credit reports from the : Experian, Equifax andTransUnion. Normally you can access your credit reports from each bureau for free once per year, but due to the COVID-19 pandemic, you’re entitled to a free credit report from each of the agencies once a week through the end of 2022. If you find inaccurate or missing information, file a dispute with the credit reporting agency and the creditor. Clearly identify each item you’re disputing and be sure to include supporting documents. 2 Pay down credit card balances to below 30 percent of your credit limit
Your credit utilization ratio is the amount of debt you have compared with your available credit. To calculate this, divide the amount of debt into the amount of available credit. If you have $10,000 in debt and $20,000 in available credit, for instance, your credit utilization ratio is 50 percent. Lenders like to see credit utilization of 30 percent or less. 3 Pay all bills on time
Your payment history accounts for 35 percent of your credit score. While late payments stay on your credit report for seven years, their impact on your score diminishes over time. 4 Don t close older credit lines after paying them off
Closing unused accounts sounds like a good idea, but it may raise your credit utilization ratio and cause your credit score to drop. 5 Don t open any new lines of credit or take out large loans
Generally, the less debt you have, the better off you are when you apply for a mortgage. FICO recommends not opening new credit accounts to increase your credit utilization ratio because each credit request can lower your score slightly. Once your credit has improved, rate shop within a 30-day window. Spreading out the rate inquiries can hurt your score. You can also use our to estimate your monthly mortgage payments. Bottom line on credit score needed to buy a home
There’s no universal credit score you’ll need to , as score requirements differ based on the type of loan you’re applying for. At a bare minimum, you’d want a score around 620, unless you’re going for a FHA. And, as a general rule, the higher your score is, the easier it will be to qualify for a mortgage. That’s why it’s essential to improve your credit score for better mortgage rate offers from lenders. SHARE: Libby Wells covers banking and deposit products. She has more than 30 years’ experience as a writer and editor for newspapers, magazines and online publications. Troy Segal is Bankrate's Senior Homeownership Editor, focusing on everything from upkeep and maintenance to building equity and enhancing value. Jeffrey L. Beal, president of Real Estate Solutions, has 40 years' experience in multiple phases of the real estate industry. Related Articles