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What Credit Score Is Needed To Buy a House

There are multiple factors that lenders look at when you apply for a mortgage, and credit score is just one of those items. Understanding what the banks require will help you prepare to shop lenders and find the best terms for your credit situation. 

Let’s get started and review what the banks look at and how your credit score affects their decision.

Minimum Credit Score By Mortgage Loan Type

First, a quick review, your credit score is found on your credit report, which the lender will pull when applying for a mortgage. Depending on which credit bureau they pull, the number can range from 300-850. 

There are multiple credit bureaus, and each has slightly different scoring criteria. Your credit score predicts how likely you will pay back a loan on time. The scoring model uses information from your credit report to create a credit score.

Now that you have decided to apply for a mortgage, the lender will pull your credit score and assess your creditworthiness. Depending on which mortgage loan you will be taking, the minimum credit scoring criteria will vary slightly. 

I will quickly review each mortgage product, and the average score needed to qualify. 

Conventional loan

A conventional mortgage loan is not guaranteed or insured by the federal government. Conventional lending generally requires lower debt-to-income ratios. Low income and high debt scenarios pose additional risks to private lenders. Therefore debt ratio requirements are more stringent with conventional home loans. 

A minimum FICO credit score of 620 or higher is recommended when applying for a conventional loan. You may still qualify with a score lower than 620, but you may have a higher interest rate on your loan. 

Jumbo loan

A jumbo loan covers a larger-than-normal loan amount. Jumbo loans are used for primary homes, investment properties, and vacation homes. These homes are typically high-priced homes starting around a million dollars.

The FICO scores must be higher to be approved for a jumbo loan. The average credit score is around 740, although they may take a score as low as 660. Borrowers whose scores fall beneath the standard requirements usually have to offset that shortcoming with a low debt-to-income ratio.

FHA loan

FHA loans are federally insured loans that reduce lender risk and make it easier for borrowers to qualify for home loans. FHA loans do not require as much cash down, only 3.5%, and a credit score of 580 is accepted. If your credit score is lower than 580, a 10% downpayment may be required.

VA loan

A VA loan is a mortgage option issued by private lenders and partially backed or guaranteed by the Department of Veterans Affairs. These flexible, $0-down payment mortgages have helped more than 24 million military service members become homeowners since 1944. There is no set minimum credit score to qualify for a VA loan.

USDA loan

The U.S. Department of Agriculture (USDA) home loans program offers mortgages to low-income residents of rural areas who cannot otherwise obtain a conventional mortgage. The program provides qualified applicants with one of two options: a federal mortgage guarantee through a commercial bank or a direct loan from the government. Both are 0% down payment loans. No minimum credit score is required, but it may be easier to qualify with a score of at least 640. However, you may still be eligible if your score is lower or you have no score.

Ideal / Best Credit Score to Buy a House

The higher your credit score is, the lower your interest rate. This results in better terms on your mortgage and will save you money in the long run. As we reviewed above, not everyone has a 780 credit score, and lenders have different available mortgage products with varying requirements to suit the needs of each home buyer. It is best to position yourself to get the best terms, but you do not have to wait to buy a home if you have a 690 credit score and prefer a 780. That can take time, and you may have a great opportunity on a house you feel would suit your family for years to come. 

Other Considerations When Buying A House 

A lender uses your credit score to assess your creditworthiness when you apply for a mortgage. The lender can determine your current debt owed, how well you pay your bills and what open accounts you currently have when they pull your credit report. A credit score is not the only factor the lender reviews, but it weighs heavily into their decision.  

Debt-to-Income Ratio (DTI)

The debt-to-income ratio is the percentage of your gross monthly income (before taxes) towards payments for rent, mortgage, credit cards, or other debts. 

To calculate your debt-to-income, add up your monthly bills and divide the total by your gross monthly income. Divide the total by your gross monthly income. The result is your DTI, which will be in the form of a percentage. The lower the DTI, the less risky you are to lenders.

Loan-To-Value Ratio

Loan to value is an often-used ratio in mortgage lending to determine the amount necessary to put in a down-payment and whether a lender will extend credit to a borrower. LTV ratio is calculated by dividing the amount borrowed by the property’s appraised value, expressed as a percentage.

Income and work history

A lender will review work history to see a pattern of steady employment or shaky work history with multiple periods of nonemployment. When applying for a mortgage, you have to have enough income to pay your mortgage, utilities, and expenses each month, so lenders review this information.

What Factors Go Into A Credit Score?

While the exact criteria used by each scoring model varies, here are the most common factors that affect your credit score.

Payment history

Payment history is critical in credit scoring, and even one missed payment can hurt your score. Lenders want to be sure that you will pay back your debt when they consider you for new credit. Payment history accounts for 35% of your FICO score, which is the credit score used by 90% of top lenders.

Amounts owed

Your credit utilization ratio is the next most important factor in your credit scores. The credit utilization ratio is calculated by dividing the total revolving credit you are currently using by the total of all your revolving credit limits. This ratio looks at how much of your available credit you’re utilizing. For example, you have total available credit available of $10,000 and are using $7,000. Lenders would consider that high because anything over 30% is a negative to creditors. 

Credit History Length

How long you’ve held credit accounts makes up 15% of your credit score. This includes the age of your oldest credit account, your newest credit account, and the average age of all your accounts.

New Credit

The number of credit accounts you’ve recently opened, as well as the number of hard inquiries lenders make when you apply for credit, accounts for 10% of your credit score. Too many accounts or inquiries can indicate increased risk and hurt your credit score.

How To Increase Your Credit Score Before Buying A House

First, review your credit score to see if any errors exist. This is an easy and upfront way to improve your credit by just doing a little extra footwork. If you find errors on any of your reports, you may dispute them with the credit bureau as well as with the lender or credit card company.

Next, you can assess your credit card balances and pay down as much as possible to reduce your credit utilization rate. Also, avoid applying for any new forms of credit during the months leading up to a mortgage application.

Payment history is the most significant factor in your credit score, so this is a great way to increase your score. You will want to pay your bills on time each month. Building a consistent history of on-time payments will always be a surefire way to improve your score


Buying a home is the largest purchase you will make in your lifetime, and there is no rush. Research your credit situation, available products, lenders, and what the market has to offer. 

A mortgage is a lifetime commitment, so make choices that will put you in a position to receive the best terms that your financial situation will allow.  


This article reviews what minimum credit scores lenders require for each mortgage product and what you can do to improve your credit before applying for a mortgage. 

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