What Credit Score Is Needed to Buy a House? A 2024 Guide

A good credit score to buy a house is typically 720 or higher, which qualifies you for the best mortgage rates and terms. While it's possible to secure a loan with a score as low as 500, your credit score directly impacts your interest rate and long-term costs. This guide breaks down the minimum scores for each loan type and how to position yourself for approval.

How Lenders Use Your Credit Score When you apply for a mortgage, lenders use your FICO score—a specific credit scoring model for home loans—to assess risk. This three-digit number, ranging from 300-850, summarizes your credit history. A high score signals you're a responsible borrower, which translates to lower interest rates. Even a small rate difference of 0.25% can save you thousands of dollars over the life of your loan. Lenders also examine your full credit report to understand your payment history, current debts, and overall financial behavior.

What is a Good FICO Score for a Mortgage? Credit scores are categorized to help lenders quickly evaluate applications. For mortgage purposes, these are the general ranges:

A score of 720 or higher is considered excellent for home buying and will unlock the most favorable terms. Borrowers with scores of 670 can still qualify for decent rates, but may not have access to every loan product.

Understanding FICO vs. VantageScore You may check your score through your bank or a credit monitoring service and see a VantageScore. While similar to a FICO score, it uses a slightly different formula. It's a useful tool for gauging your credit health, but mortgage lenders exclusively use FICO scores for their decisions. The table below shows how the two scoring models compare.

Minimum Credit Scores by Loan Type The minimum score you need depends heavily on the mortgage program. Based on current (2024) guidelines, here’s what to expect:

• Conventional Loan: The minimum credit score is typically 620 to 660. These loans, not backed by the government, offer competitive rates but have stricter requirements. A higher score often leads to a better interest rate.
• FHA Loan: This government-backed loan is popular with first-time buyers. The official minimum is 500, but a score of 580 or higher is more realistic with most lenders. With a 580 score, you may qualify for a down payment as low as 3.5%.
• VA Loan: Available to veterans and service members, VA loans often have a minimum score requirement of 580 to 620. They offer competitive rates and may not require a down payment.
• USDA Loan: For low-income buyers in rural areas, USDA loans typically require a score of 580 to 620. These loans offer flexible terms and may not require a down payment.
• Jumbo Loan: For loan amounts exceeding conventional limits, you’ll generally need a score of 680 to 700 or higher due to the increased risk for the lender.

Other Key Factors in Mortgage Approval Your credit score is crucial, but it's not the only factor lenders consider.

• Debt-to-Income Ratio (DTI): Your DTI compares your monthly debt payments to your gross monthly income. Most lenders prefer a DTI below 50%, including your new mortgage payment.
• Down Payment: A larger down payment can sometimes compensate for a lower credit score by reducing the lender's risk.
• Employment and Income History: Lenders require proof of stable income to ensure you can afford the monthly payments.

How to Improve Your Credit Score Before Buying If your score needs a boost, take these steps several months before applying for a mortgage:

• Check Your Reports: Review your reports from all three bureaus (Equifax, Experian, and TransUnion) at AnnualCreditReport.com and dispute any errors.
• Pay Down Balances: Focus on reducing your credit utilization ratio—the amount of credit you're using compared to your limits—by paying down credit card debt.
• Make Payments On Time: Set up automatic payments to avoid missed or late payments, which heavily impact your score.
• Avoid New Credit Inquiries: Limit applications for new credit cards or loans in the months leading up to your mortgage application.

Buying a home with a low credit score is possible, but improving your score first is the most effective way to save money. Start by checking your credit report early in the process to understand where you stand and create a plan for improvement.