Many things factor into getting a mortgage, but it all starts with your credit score and your credit history. While there is no official minimum credit score for a home loan approval, the minimum FICO credit score for conventional loan approval tends to be around 620. Different lenders will consider different factors when determining whether to approve you for a loan—and at what rate—and you may still be able to qualify for a loan with a lower credit score.
Find out the minimum credit score for other types of home loans, how your credit score affects your mortgage loan rates and what you can do to increase the chances you’ll be approved for a mortgage when the time comes.
Why Does Your Credit Score Matter for a Mortgage Loan?
Your credit history tells a financial story about you. It lets mortgage lenders better understand whether you’re reliable, how likely you are to pay off your debt and whether your debt-to-income ratio is low enough to allow you to cover your current debt obligations in addition to a new mortgage payment.
If you have bad credit you may look like a risky investment to potential lenders, and you’ll be less likely to get the approval. Or, if you do get approved, you may be required to pay higher interest rates than individuals with a higher credit score.
Luckily, you can still get approved for a home loan even with a low score. That’s because your credit score is critical, but it’s not the only factor lenders consider. Plus, different types of loans come with different requirements, so you don’t always need a good credit score to qualify.
What Credit Score Do You Need to Buy a House in 2019?
The minimum credit score for a home loan approval tends to be around 620, though it does vary from lender to lender and the type of loan you are applying for. According to Lexington Law, the average credit score to get approved for a home loan in 2019 can range from 580 to 640, which is generally considered a poor to fair credit score. A good credit score will open even more lending doors and help you qualify for better interest rates.
Conventional loans originated by banks, credit unions, and other private mortgage lenders typically have higher credit score requirements. Government-backed loans tend to be seen as lower risk and may have less stringent credit score requirements. Your specific situation will also play a role in whether you get approved. For example, if you have an excellent credit utilization ratio and a solid payment history for the past two years but a single old negative item is bringing down your score, the mortgage lender may take this into account.
Here’s a look at some common types of mortgage loans and what credit score you need to be considered for approval with good interest rates.
- USDA loan: These loans are partially backed by the federal government and are available to individuals buying qualifying suburban or rural homes. The USDA does not require down payments or set minimum credit score requirements, but their guidelines recommend a minimum credit score of 640, the threshold for automatic approval using the USDA’s Guaranteed Underwriting System.
- VA loan: Available to eligible veterans and their families, VA loans are backed by the Department of Veterans Affairs and don’t require a down payment or private mortgage insurance. The VA does not establish minimum credit score requirements either but suggests that most mortgage lenders consider a minimum credit score of around 620 as typical for being approved for a VA loan.
- FHA loan: FDA loans are backed by the Federal Housing Commission and are seen as a lower risk by lenders because they are government-backed loans. This option is a common choice for anyone who qualifies as a first-time home buyer because of its relatively low minimum credit score requirements. You can get approved for a significantly reduced down payment requirement if you have a minimum credit score of 580. And if your score is below 580, you may still be approved but be required to pay a higher initial down payment.
How to Position Yourself for a Better Home Loan Opportunity
If you want the best chances of approval at the best rates, you’ll want a good or excellent credit score—generally a FICO score above 740. If your credit score is below 700, you might want to take some time to improve your score before applying for a mortgage, especially since the application process itself can actually lower your score by a few points.
First, check your credit score on Credit.com and get a free credit report card that helps you understand where you stand when it comes to factors such as payment history, account mix and credit utilization.
This will help you understand where you might be able to make quick improvements to bring your score up a bit. One relatively quick way to improve your bad credit score is to commit to reducing your debt-to-income ratio and paying off your credit card debt on time and in full when possible.
Then, use our mortgage loan calculator to compare loan details, monthly payments, and other loan options. Simply plug in your credit score and other relevant information and immediately determine what types of options might be available to you and how much they could cost.
If you discover that your credit score is too low to get approved for a home loan right now—or to get approved for the loan that you prefer—it might be time to look into credit repair options. You can take some actions yourself to improve your credit, but to reduce the hassle and cut through some of the frustration, consider working with a professional service to improve the health of your credit before you try to buy a home.
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Jeanine Skowronski is the former Executive Editor of Credit.com. Her work has been...
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