If you’ve ever wondered what kind of credit score you need to buy a house, the answer is, “It depends.”
There are a variety of home loan programs available to buyers. In this article, we’ll take a look at several of them — including conventional loans, FHA loans, VA loans and USDA loans — and explain what kind of credit score each requires.
What Is a Good Credit Score To Buy a House?
When it comes to the right credit score to buy a house, higher is definitely better, according to Beverly Harzog, consumer finance analyst and credit card expert for U.S. News & World Report:
“Get your credit score as high as you possibly can before you apply for a mortgage. The lowest interest rates are given to people who have at least a 760 FICO score. You can save thousands of dollars over the life of your mortgage when you have excellent credit.”
Table of Contents
- Conventional Loan Credit Score Requirements
- Federal Housing Administration (FHA) Loan Credit Score Requirements
- Veterans Affairs (VA) Loan Credit Score Requirements
- United States Department of Agriculture (USDA) Loan Credit Score Requirements
Conventional Loan Credit Score Requirements
- Minimum credit score of 680 is generally required.
- Some lenders may allow a 640 or even a 620 score.
A conventional loan is a mortgage product in a class all its own. It isn’t backed by the FHA, VA or USDA like the other loan products we’ll cover below. Rather, it adheres to guidelines set by either Fannie Mae or Freddie Mac — two of the nation’s largest mortgage clearinghouses.
“Conventional loans have tougher requirements, so these loans are generally appealing to those who are in a good place financially,” Harzog says. “Those who qualify tend to make bigger down payments and have a low risk of defaulting.”
With conventional loan credit score requirements, you generally want to have a score of 680 or above. If you’re in the 700s, so much the better.
When you drop down below 660, you may find that some lenders won’t want to work with you. Other lenders may offer more flexibility — allowing you to go as low as 640 or even 620.
While lending qualifications vary by lender, anything below that is generally considered to be subprime mortgage territory.
Federal Housing Administration (FHA) Loan Credit Score Requirements
- Requires a 580 credit score.
- Scores lower than 580 must put 10% down.
The Department of Housing and Urban Development (HUD) has long been known as a haven for homebuyers with lower credit scores and those who can afford only minimal down payments. That’s thanks to its Federal Housing Administration (FHA) mortgage loan program.
The program’s policy allows credit scores of 580 and above to qualify for loans with a 3.5% down payment. However, those with lower credit scores aren’t barred from the program; they just have to bring 10% of the home’s purchase price into the deal.
“Remember that the lower your down payment, the higher your monthly payment will be because you’ll be borrowing more money,” Harzog says.
Veterans Affairs (VA) Loan Credit Score Requirements
- There is no minimum credit score requirement.
- The VA is not a direct lender, which is why it has no requirements.
- Partner lenders generally look for 620 credit score.
The U.S. Departments of Veterans Affairs makes its loan program available to all service members, veterans, and eligible surviving spouses who want to buy a home.
There is no credit score requirement to participate. However, because the VA is not a direct lender, their private lending partner do have their own internal lending standards. Generally, that means they look for a score of at least 620.
The good news is that there is some flexibility on credit score with a VA loan. The bad news is that you’ll likely pay a higher interest rate if you have a credit score that’s lower than 620.
That’s why Harzog says you should “shoot for at least a 640 to put yourself in the range for a better rate” if you’re interested in a VA mortgage loan.
You don’t have to come up with a down payment to finance through the VA loan program unless it’s required by the private lender.
United States Department of Agriculture (USDA) Loan Credit Score Requirements
- No minimum credit score requirements
- Better interest rates with a score in the high 600s
The United States Department of Agriculture makes mortgage loans available for the purchase of homes throughout rural America.
If you come into the program with a low credit score, the USDA says that you should have an otherwise clean credit file. That means no:
- Collections
- Charge-offs
- Judgments
- Disputed accounts
Harzog notes that, while some scores lower than 640 might be accepted, it’s best to try to get your score into the high 600s to get a better interest rate on a USDA loan.
USDA loans are similar to VA loans in that there’s no down payment required.
Final Thought
The credit score you need to buy a house varies by lender and by which mortgage loan program you use. As a general rule, the higher your score, the better off you’ll be.
“If you have at least a 760 FICO score, you should get the top rates. If that’s not realistic for you right now, shoot for at least a 700 FICO score. You won’t get the top rates, but you’ll still save a lot of money over the long run,” Harzog says.
For ways to improve your credit score, read about these 5 sneaky ways to ways to improve your credit score.
When you’re ready to buy a home, see Team Clark’s step-by-step guide. It includes information on websites that will let you check your credit files and scores for free, that you’ll know when you’re on the path to a good credit score — and buying the home of your dreams!
