Credit scores can be a confusing topic for even the most financially savvy consumers. Most people understand that a good credit score boosts your chances of qualifying for a mortgage because it shows the lender you’re likely to repay your loan on time.
It’s why many lenders have minimum required credit scores for the loans they offer. But do you know the minimum credit score you need to qualify for a mortgage and buy a house? And did you know that this minimum will vary depending on what type of mortgage you’re seeking?
While every lender is different, understanding where your score falls and how your score impacts your loan application is key. Here’s what you need to know.
What’s A Good Credit Score To Buy A House?
Generally speaking, you’ll need a credit score of at least 620 in order to secure a loan to buy a house. That’s the minimum credit score requirement most lenders have for a conventional loan. With that said, it’s still possible to get a loan with a lower credit score, including a score in the 500s.
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Minimum Credit Score Required By Mortgage Loan Type
The minimum credit score you need to qualify for a mortgage in 2023 depends on the type of home loan you’re trying to obtain. Scores differ whether you’re applying for a loan insured by the Federal Housing Administration, better known as an FHA loan; one insured by the U.S. Department of Veterans Affairs, known as a VA loan; a USDA loan insured by the U.S. Department of Agriculture; a jumbo loan or a conventional mortgage loan from a private lender:
Type of Loan | Minimum FICO® Score |
Conventional mortgage | 620 |
FHA loan requiring 3.5% down payment | 580 |
FHA loan requiring 10% down payment | 500 (Rocket Mortgage® requires a minimum score of 580 for an FHA loan.) |
VA loan | The VA has no minimum credit requirement, though lenders can set their own. (Rocket Mortgage requires a minimum score of 580 for a VA loan.) |
USDA loan | The USDA has no minimum credit score requirement, but most lenders require a 640 or higher. (Rocket Mortgage doesn’t offer USDA loans at this time.) |
Jumbo loan | Depends on the lender (Rocket Mortgage requires a 680 for a 30-year fixed jumbo mortgage or 740 for a 15-year fixed or adjustable jumbo loan.) |
Conventional Mortgages
Conventional mortgages are home loans that follow the standards set by Fannie Mae and Freddie Mac, but aren’t insured by any government agency. This type of financing is typically best for those with good or excellent credit, as these loans require a higher credit score than government-backed loans.
Conventional loans also tend to offer the most competitive interest rates and flexible repayment periods, from 8- to 30-year mortgage terms.
Minimum Credit Score Needed For A Conventional Mortgage
As we said, most lenders – including Rocket Mortgage – require a minimum credit score of 620 for a conventional mortgage.
FHA Loans
FHA home loans are insured by the Federal Housing Administration, making them less risky for lenders and, because of this, easier to qualify for than conventional mortgages. They also offer down payments as low as 3.5% and low-equity refinances, which allow you to refinance up to 97.75% of your home’s value.
FHA loans can benefit borrowers with lower credit scores or those who spend a significant portion of their income on housing. Current homeowners who are underwater on their mortgages – and could lower their monthly payment by refinancing – may also benefit from an FHA loan.
Minimum Credit Score Needed For An FHA Loan
You’ll need a minimum credit score of 580 to qualify for an FHA loan that requires a down payment of just 3.5%. There is no minimum FICO® Score, though, to qualify for an FHA loan that requires a down payment of 10% or more, but some lenders may set their own minimum. For instance, the minimum FICO® Score for an FHA loan through Rocket Mortgage is 580.
However, FHA loans are originated by private lenders, and these lenders will usually have their own minimum credit score requirements. For instance, the minimum FICO® Score for an FHA loan through Rocket Mortgage® is 580.
For a standard FHA loan, a minimum of one credit score is required to qualify. If your lender obtains all three of your credit scores, it will use the middle score for consideration. If you apply for a mortgage with your spouse, lenders will use the lower of the two middle credit scores.
VA Loans
If you meet the requirements, a VA home loan, insured by the U.S. Department of Veterans Affairs, can be a smart financial move. That’s because these loans don’t require any down payment at all. They're also available to borrowers with lower credit scores.
The difficult part is meeting the eligibility requirements:
- You must be an eligible member or veteran of the U.S. Military, or a member or veteran of the U.S. Military Reserves or National Guard.
- Spouses of military members who died while on active duty or because of a service-related disability can also apply for one of these loans.
VA loans allow you to finance up to 100% of the home’s purchase price without making you pay for private mortgage insurance (PMI). VA loans, though, do have a one-time funding fee. This fee varies depending on your down payment, the type of loan, how many times you’ve chosen a VA loan and the type of military service you logged.
For instance, if you don’t make a down payment and it’s your first VA loan, your VA funding fee will be 2.15% of your loan amount. However, if you were to put 10% down on your home, your funding fee would be 1.25%. Veterans that receive a disability rating from the VA don’t have to pay the funding fee.
Minimum Credit Score Needed For A VA Loan
The VA has no minimum credit requirement. With Rocket Mortgage, borrowers applying for VA loans must have a minimum FICO® Score of 580.
USDA Loans
The U.S. Department of Agriculture offers USDA home loans to help promote rural development. To qualify for this type of mortgage, you’ll need to purchase a home that is a single-family residence and is located in an eligible rural location. Your income also can’t be more than 115% of the area’s median household income.
USDA loans are popular among repeat and first-time home buyers alike because they don’t require a down payment and offer low interest rates. Plus, borrowers can finance their closing costs and pay off their mortgage early without a prepayment penalty.
Minimum Credit Score Needed For A USDA Loan
The USDA doesn’t have a set minimum credit score for home buyers, but lenders can specify their own. Many lenders require a credit score of 640 or higher for initial approval. However, you could be approved with a lower credit score, depending on your situation.
Jumbo Loans
A jumbo loan is similar to a conventional mortgage except that the loan amount exceeds the conforming limits set by the Federal Housing Finance Agency (FHFA). In preparation for 2023, the FHFA set the conforming loan limit to $715,000. If you live in a high-cost area, such as Hawaii or Alaska, the limit is $1,073,000.
Jumbo loans typically require a low debt-to-income ratio and high credit score. You’ll also need a substantial amount of cash reserves to be approved for a jumbo mortgage.
Minimum Credit Score Needed For A Jumbo Loan
Since jumbo mortgages allow such a high loan amount, lenders can be stricter about their minimum credit score requirements. For Rocket Mortgage, you’ll need at least 740 if you choose a 15-year fixed- or adjustable-rate Jumbo Smart loan. But you could qualify with a credit score of 680 for a 30-year fixed-rate jumbo loan.
Factors That Go Into A Credit Score
It’s important to know your credit score and understand what affects it before you begin the mortgage process. Once you understand this information, you can begin to positively build your credit score or maintain it to give yourself the best chance of qualifying for a mortgage.
One of the most common scores used by mortgage lenders to determine creditworthiness is the FICO® Score (created by the Fair Isaac Corporation). FICO® Scores help lenders calculate the interest rates and fees you’ll pay to get your mortgage.
While exact scoring models may vary by lender, some variation of the standard FICO® Score is often used as a base. FICO® takes different variables on your credit reports from the three major credit bureaus (Equifax®, Experian™ and TransUnion®) to compile your score. FICO® Scores range from 300 – 850 and are based on your:
- Payment history
- Amount owed
- Length of credit history
- Types of credit
- New credit
The higher your score, the easier it’ll be to qualify for a lower interest rate on a great mortgage.
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Additional Factors Lenders Consider For A Mortgage
Your credit score is a key factor in determining whether you qualify for a mortgage. But it’s not the only one lenders consider. Your mortgage lender will also evaluate your:
- Income: Lenders verify your income before approving you for a mortgage. They want to make sure you make enough money each month to afford your payments.
- Debt-to-income ratio: Lenders also look at your monthly debts. Lenders vary, but they generally want your total monthly debts, including your estimated new mortgage payment, to consume no more than 43% of your gross monthly income. If your debt-to-income ratio is higher, you might struggle to qualify for a mortgage.
- Down payment: The bigger your down payment, the more likely it is that you’ll qualify for a mortgage with a lower interest rate. That’s because lenders think you’re less likely to stop making your payments if you’ve already invested a significant amount of your money into your loan. A higher down payment makes your loan less risky for lenders.
- Savings: Lenders want to make sure that you have funds available to make your mortgage payment if your income should unexpectedly dry up. Because of this, most will want to see that you have enough money saved to cover at least 2 months of mortgage payments.
- Employment history: Lenders vary, but they usually like to see that you’ve worked at the same job, or in the same industry, for at least 2 years. They believe you’re less likely to lose that job, and that stream of income, if you’ve built up a longer work history.
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How To Improve Your Credit Score Before Buying A House
Fortunately, it’s possible to boost your credit score. Be aware, though, that there are no quick fixes. It takes time to improve an ailing credit score.
You can do the following to help boost your credit score before filling out a mortgage application:
- Check your credit report for errors. You can order one copy of each of your three credit reports – maintained by Experian®, Equifax™ and TransUnion® – each year from AnnualCreditReport.com. Once you get these reports, check them for errors.
- Monitor your credit score. Another great way to stay on top of your credit score is through Rocket Homes℠. Create an account for free and review your TransUnion® credit report and track your VantageScore® 3.0 credit score to learn how you can improve it if necessary.
- Become an authorized user. A family member could help you boost your credit score by adding you as an authorized user on an existing credit card account. Don’t run up debt on this card, though. If you do, you could hurt the primary user’s credit score.
- Pay your bills on time. Paying your bills on time each month is the surest way to slowly improve your credit score.
- Pay down your credit card debt. Paying down your credit card debt is another way to steadily improve your score. But don’t close the credit card account once you pay it off.
Minimum Credit Score To Buy A House: FAQs
What’s the minimum credit score I need to buy a house?
The lowest credit score that will qualify you for a mortgage depends on the type of home loan you use and the lender you apply to.
As mentioned above, 620 is typically the minimum credit score required for a conventional mortgage, but you might be able to secure financing with a lower credit score. For example, you could qualify for an FHA loan with Rocket Mortgage if you have a 580 or higher.
Can I get a home loan with bad credit?
It’s possible to qualify for a mortgage even if your credit score is low. It’s more difficult, though. A low credit score shows lenders that you may have a history of running up debt or missing your monthly payments. This makes you a riskier borrower.
To help offset this risk, lenders will typically charge borrowers with bad credit higher interest rates. They might also require that such borrowers come up with larger down payments.
If your credit is bad, be prepared for these financial hits. You may qualify for a mortgage with a low credit score. You’ll just have to pay more for it.
Should I fix my credit score before buying a house?
Your credit score not only qualifies you for a mortgage. It also helps to determine your interest rate and loan terms. If you have poor credit, taking the opportunity to improve your score can help you land a better interest rate and a longer repayment term. This, in turn, could give you a lower monthly mortgage payment or reduce the amount of interest you pay over the life of the loan.
The Bottom Line: The Credit Score You Need Depends On The Loan You’re Applying For
The credit score required to buy a home may differ based on the type of loan you are looking to qualify for. But, no matter what type of financing you’re thinking about getting, the higher your credit score is, the easier it will be to get a better interest rate on your mortgage. Talk to a Home Loan Expert today to see where you stand.
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