What Credit Score Do You Need to Buy a House?

Ready to become a homeowner? Before you find a real estate agent or apply for a loan, you need to have a clear sense of the credit score needed to buy a house.

If you don’t meet the minimum credit requirements, your application may get turned down. Even if you’re able to get approved, your interest rate could be much higher than the current market rates.

In this article, you’ll learn about the score you need to buy a home based on various mortgage options. 

What credit score do you need to buy a house?

The credit score needed to buy a house largely depends on the type of home loan you’re applying for. Here’s an overview.

Conventional loans

Lenders typically require borrowers to have a score of at least 620 to qualify for a conventional home loan. Traditionally, these loans required 20% down. However, that hasn’t been the case for many years. Many lenders now offer various conventional loan options, where the down payment requirements range from 3% to 20%. 

When exploring conventional loans, talk to your lender about how much you’ll have to put down. If you aren’t eligible for a 3% down option, you may still be able to put down less than 20%, such as 5% or 10%.

FHA loans

FHA loans are one of several federally insured mortgage options. As such, they offer perks to incentivize lenders and consumers to use them. One of the biggest advantages is that you may be able to qualify with a score of 580 and still only have to put down 3.5%.

The FHA also has loan options for consumers with scores as low as 500, but the down payment requirements increase to 10%. You’ll also have to carry private mortgage insurance, which can add $100–$300 to your monthly payment or more. 

USDA loans

USDA loans are another federally insured option that’s designed to encourage consumers to purchase in more rural areas. The minimum score requirements vary by lender but typically fall between 620 and 640. If you’re eligible for a USDA loan, you could have a $0 down payment for your home. 

However, you’ll still have to cover some closing costs and escrow fees. These fees may total about 2%–3% of the home’s purchase price.  

VA loans

VA loans are only available to eligible veterans, active duty service personnel, and select family members. While there are no official credit score requirements, it's generally best to have a score of at least 620. 

If you qualify for a VA loan and want to learn more, find a lender that has experience with these types of mortgages. There are some additional inspection requirements, which can make the home-buying process a bit more complex and lengthy. 

Can you buy a house with bad credit?

It depends on what you consider “bad” and what type of loan you want to apply for.

FHA loans are the best fit for borrowers with lower scores, as the requirements are the most flexible. If you want to qualify for a 3.5% down payment FHA loan, you’ll need a credit score of at least 580. The FHA also offers a 10% down payment option for borrowers with a score of at least 500.

However, be prepared to have your financial habits and credit history heavily scrutinized. Lenders will want to see that you have enough money to maintain cash reserves and a relatively low debt-to-income ratio.

How your credit score affects your mortgage rate

Mortgage interest rates are based on a number of factors, including:

• Inflation
• Federal financial policy
• Current market rates
• Individual borrower eligibility

While you can’t do anything about the current market rates, you can improve your odds of qualifying for the best available interest rates by boosting your score.

If you have a poor credit score, your rate will be worse than the current market rates, which means paying tens of thousands of dollars in additional interest over the life of the loan. 

Raising your credit score can take anywhere from a few months to a year or more. As for how long it takes to reach the score needed to buy a house, that varies based on where you’re starting from. If you’re close to the target score threshold, you may be able to hit your goal in a few months. 

To find out where you stand, you should check your score and request a free credit report from each of the three credit bureaus.

Keep in mind that checking your own score doesn’t lower it. Your score will take a slight hit if you apply for a financial product, but reviewing your score yourself or requesting a report from any of the big three credit bureaus has no impact. 

Jumpstart your home-buying journey with Kikoff

If you aren’t at or above the minimum credit score needed to buy a house, it’s time to get to work. That means paying down debts and exhibiting a consistent, positive financial history.

Tools like Kikoff can help by reporting verified rent and utility payments to the credit bureaus. Kikoff also offers a variety of other tools that can help you strengthen your credit profile over time.

Add positive payment history to your credit profile with Kikoff.