You’ll usually need a minimum credit score of 620 to buy a house with most conventional mortgages. But to typically get the best rates and more loan options, you should aim for a credit score of at least 700 to buy a house.
Bu if your credit score is under 620, don't lose hope. You can likely still buy a house. There are mortgages available to you, such as government-backed loans and programs that have lower credit requirements. And while your credit rating is important, it’s only one factor that mortgage lenders look at. Always consult with your mortgage lender and financial professionals to get a clear picture of whether or not you're qualified to buy a house.
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What credit score do you need to buy a house with a mortgage?
| Credit score range | Home loan options | Things to consider |
| 500–579 | FHA (10% down) | High mortgage insurance, fewer options |
| 580–619 | FHA, and sometimes USDA and VA | Flexible financing, modest rates |
| 620–659 | Conventional, FHA, VA | Good approval odds, decent rates |
| 660–699 | Conventional | Better rates, stronger lender options |
| 700+ | All loan types | Best rates, most flexibility |
*Disclaimer: The information provided in this table is for informational purposes only. It is not intended as legal, financial, investment, or tax advice, and should not be relied upon as such. Consult a licensed financial advisor or tax professional regarding your personal financial situation before making any decisions.
The higher your score, the better your mortgage tends to be. Even a small increase in your credit rating can give you a lower rate and more flexible repayment terms.
Credit scores range from 300 to 850. If your score is around 670 and above, it’s considered good to excellent, and you shouldn’t have any problem getting a conventional home loan.[1]
If your credit falls in the 580-669 range, it is considered fair. While there are still loan options available to you in this range, you should expect to pay a higher interest rate.Anything below 580 is considered poor credit. Your options are definitely limited but you can still buy a home with bad credit, especially with FHA loans that are backed by the federal government.
How do credit scores affect mortgage interest rates?
Credit scores have an impact on interest rates, but maybe not as much as you might assume. For example, a credit score of 620 has an average interest rate of 7.89% for a 30-year conventional mortgage, which is less than a percentage point higher than the 7.07% you can get with an 840 score.[2]
That said, even a small difference in interest rates can compound over time. For example, if you bought a $425,000 home with 20% down and had a 30-year mortgage at 7.07%, you’d pay a total interest of $480,093. However, at 7.89%, your total interest paid goes up to $548,760, a difference of over $68,000.
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Other financial factors mortgage lenders look for
Your credit score is just one piece of the puzzle. Other factors that affect your eligibility and interest rates include:
- Debt-to-income ratio (DTI): Most conventional loans require a DTI under 43%, although you’ll get the best rates with a DTI under 36%.[3] Some lenders may allow an even higher DTI for FHA loans of up to around 50%.[4]
- Down payment: You’ll need at least 3% down for most conventional mortgages, although zero downpayment options are available for some government-backed loans.[5] The higher your downpayment, the better your rate and terms. In some cases, you may be able to use your 401(k) or IRA for a down payment.
- Income: There are no set income requirements for conventional loans, but lenders will need proof that you have enough income to afford the house you want to buy. Some government-backed mortgages designed for low-income borrowers may have maximum income limits.
Buying a house with a low credit score
If your credit score is under 620, your options are more limited. Ideally, you should focus on increasing your credit score first. But if that’s not possible, these low credit score options may help you buy a house with bad credit.
FHA loan
An FHA loan is probably your best bet for getting a mortgage with a credit score under 620. This loan is backed by the government and is primarily for first-time homebuyers and buyers with past financial challenges. The lowest credit score you can have for an FHA loan is 500.
However, be aware that lenders set their own requirements, so they’re not obligated to approve you even if your credit score is above 500. Also, if your credit score is between 500 and 579, you’ll need a minimum downpayment of 10%. Only a 3.5% downpayment is required for credit scores of 580 and above.[4]
VA loan
VA loans don’t have a government-mandated minimum credit score, but most lenders require at least 620. That said, if you otherwise qualify, you may be able to negotiate with your lender if your credit score is below 620.
VA loans are attractive because they require no down payment and no private mortgage insurance. They also limit the closing costs that lenders can charge, which helps make them an affordable option.Rent to own
Rent to own
You may be able to qualify for a rent-to-own home with a credit rating as low as 500. These programs give you an option to “test out” your new home and build credit while you make monthly rent payments. At the end of the rental period, you’ll have an option to buy the home outright.
However, be aware that some of these programs charge rent that is much higher than typical rent and they often charge fees if you don’t buy. Also, you’ll need to qualify for a mortgage after the rental period and if you fail to do so you risk losing your money.
How to raise your credit score before buying a house
Raising your credit score is one of the best ways of qualifying for a better mortgage and it should be a priority early on when buying a home. Here are the steps to take:
- Reduce credit card balances: Aim for under 30% utilization and try to pay off your credit card balance each month.
- Avoid opening new accounts: Too many hard inquiries can lower your score, so only open new accounts if you need them.
- Correct errors: Monitor your credit report and look for any potential errors.
- Make payments on time: Prioritize making payments by the deadline to develop a good payment history.
- Create a debt repayment plan: Build a budget that enables you to set aside some money each month to pay off your debts.
When you’re ready to buy or sell a home, be sure to reach out to a real estate expert for advice. Clever’s team of licensed professionals can advise you on next steps and connect you with top local realtors. Get started today.
FAQ about what credit score you need to buy a house
What’s the minimum credit score needed to buy a house?
Most lenders require a minimum credit score of 620 for a conventional mortgage. FHA loans have minimum credit score requirements of just 500, although they sometimes come with additional down payment requirements.
What is a good credit score to buy a house?
A good credit score for a mortgage is generally above 700. If your credit score exceeds this threshold, you’ll have an easier time finding the best rates and terms. However, other factors, such as debt-to-income ratio and your downpayment, will also affect your mortgage terms.
*Disclaimer: The information provided in this article is for informational purposes only. It is not intended as legal, financial, investment, or tax advice, and should not be relied upon as such. Consult a licensed financial advisor or tax professional regarding your personal financial situation before making any decisions.