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Nov 01, 2020 | By
What credit score is needed to buy a house?

What credit score is needed to buy a house?

Credit scores play a critical role in the home-buying process. The stronger your score, the better the chance that you'll be able to get a mortgage with great interest rate.

Buyers with scores in the 700s save thousands in interest payments over the life of the loan.

You don't need a perfect credit score to buy a house, but having a higher credit score makes a big difference in the amount of money you pay over the course of a loan.

Minimum credit score requirements are different for every lender, and also for each loan program, and property type.

What is the credit score to buy a house?

Government loan programs have a lower score requirement than a conventional loan.

Below is the list of the minimum credit score requirements.

LOAN TYPEMINIMUM CREDIT SCOREDESIGNED FOR
FHA home loan (government loan)580 with a 3.5% down payment; 500 with 10% down

0 credit score is also acceptable with a 3.5% down payment.
Buyers who are interested in a low down payment
VA home loan (government loan)580 credit score, though some lenders will allow a score as low as 500

O credit score is also acceptable.
Veterans buying a home
USDA home loan (government loan)580 credit score; but some lenders will allow a score as low as 500.

0 credit score is also acceptable.
Qualified buyers purchasing a home in a designated rural area
Conventional home loan620 is the minimum.

0 credit score is also acceptable
Buyers seeking a traditional mortgage

More info:

Is it possible to buy a house with a low credit score?

Yes, it is possible, your options will be limited and you may be required to provide proof that you've been paying your bills on time, including rent.

It may be a frustrating process for you because the lender will require lots of documentation to show that you are capable of handling a new mortgage payment.

Your interest rate will also be in the higher range, but at least you'll be able to become a new homeowner.

Read more: How to improve your credit score >>

Why credit scores matter for a home loan

Credit scores are an indication of how risky you are as a borrower. The lower the score the higher the risk.

This is why interest rates are higher for lower credit scores.

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