What Credit Score is Needed for a Home Loan?

Higher credit scores can get you better interest rates and terms on home loans, but the typical minimum credit required is 620. The higher your credit, the more reliable you seem to lenders, so you’ll have an easier time getting approved.

Loans are not created equal, so depending on the type of loan you get, you can see higher or lower minimum requirements. 

Credit Score Requirements Based on Loan Type:

• Federal Housing Administration (FHA) Loans: These loans are typically more accessible, but come with mortgage insurance, which adds to the total cost.
• Conventional Loans: You can make yourself more attractive to lenders by having a large downpayment (like 25%), but you’ll need more money in your pocket initially.
• VA Loans: Loans for veterans and active service members. These have no official minimum required score to qualify, but as usual, the higher your score, the better. 

Why is higher credit better for loans?

Lenders will usually give better interest rates to borrowers with higher credit because they’re more likely to pay back their loans on time. Interest rates change based on a ton of factors, like government policies, inflation, and the supply and demand of credit. So if you have higher credit, you’ll get the best (lowest) interest rate that the lender can give you.

Low interest rates are good because it means you’ll pay less. When you take out a loan, you have to pay it back in full, plus pay back whatever interest you’ve accrued over time. 

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