What credit rating is needed to buy a home? It varies depending on the type of loan


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  • The minimum credit score you need to buy a home will vary depending on the lender and the type of loan.
  • For conventional loans, you will need a credit score of at least 620.
  • To get the best mortgage interest rates, aim for a credit score of at least 740.
  • Get Your Free Credit Score With Credit Karma »

Credit scores play a vital role in the home buying process. The the higher your score, the better the chances that you can obtain a mortgage loan at a favorable interest rate.

The good news is, you don’t need a perfect credit score for buying a home. And you might be surprised to learn that the minimum credit score requirements will be vary by lender and type of loan.

What credit rating is needed to buy a home?

At the end of the day, there is no single credit score that can guarantee you mortgage approval. Each lender is free to define their own credit score requirements.

But many types of loans are insured by government agencies. And lenders cannot accept borrowers whose credit score is lower than the minimum set by these organizations. The four most popular types of home loans are:


Not supported by a government agency, but must follow the underwriting guidelines of Fannie Mae and Freddie Mac.

Minimum credit score: 620


Loans guaranteed by the Federal Housing Administration.

Minimum credit score: 580 for a down payment of 3.5%; 500 for down payments of at least 10%


Loans guaranteed by the US Department of Veterans Affairs (for the military).

Minimum credit score: No minimum


Loans guaranteed by the US Department of Agriculture (for low to middle income families who buy a house in a rural area).

Minimum Credit Score: No minimum, but with a credit score of at least 640 you could qualify for a simplified credit analysis

It is important to point out that lenders are free to set minimum credit score requirements higher than those required by lending agencies. For example, Quicken Loans states that the lowest score it will consider for a VA loan is 620, although the Veterans Administration does not have a set limit. And, during the COVID-19 pandemic, many lenders are demanding higher credit scores to stem the tide of mortgage applications.

What is a good credit score for buying a home?

So far, we’ve only discussed the minimum credit score that a mortgage lender will consider. Corn what type of credit score could qualify you for the best rates? FICO divides its credit scores into five ranges:

Wanting to get your credit score in the “Good” range (670 to 739) would be a good start in qualifying for a mortgage. But if you want the lowest rates, try to get your score in the “Very Good” range (740-799).

It’s important to stress that your credit score isn’t the only factor lenders take into account during the underwriting process. Even with a high score, lack of income or employment history or a high debt-to-income ratio could cause the loan to fail.

How Credit Ratings Affect Mortgage Interest Rates

Your credit score can have a major impact on the overall cost of your loan. Each day, FICO publishes data which shows how your credit score could affect your interest rate and your payment. Below is an overview of the monthly cost of a 30-year, $ 200,000 fixed rate mortgage in August 2021:

This is an interest spread of over 1.5% and a monthly payment difference of $ 177 between the credit score range of 620 to 639 and the range of 760+.

These differences can really add up over time. According to the Consumer Financial Protection Bureau (CFPB), a $ 200,000 house with an interest rate of 4.00% costs $ 61,670 more over 30 years than a mortgage with an interest rate of 2.25%.

How to Improve Your Credit Score Before Buying a Home

The first step to improving your score is knowing where you stand. During the coronavirus pandemic, you can check your credit report for free once a week with the three major credit bureaus (TransUnion, Equifax, and Experian) at AnnualCreditReport.com.

If you find any errors in any of your reports, you can dispute them with the credit bureau as well as with the lender or the credit card company. Regarding your credit score, your bank or your credit card issuer may provide your score for free. Alternatively, you can also use a free credit score monitoring tool like Credit Karma or Sesame Credit.

What can you do if you find that your score must be improved? One idea would be to pay off your credit card balances to reduce your credit utilization rate. Also, avoid seeking new forms of credit in the months preceding a mortgage application.

And, most importantly, pay your bills on time every month. Your payment history is the factor that has the greatest influence on your credit score. Building a consistent on-time payment history will always be a sure-fire way to improve your score.


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