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Credit Score Needed to Get a Home Loan

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Our goal here at Credible is to give you the tools and confidence you need to improve your finances. Although we do promote products from our partner lenders, all opinions are our own.

The credit score you need for a home loan is probably lower than you think. Lenders use your credit score — and other indicators of your financial strengths and weaknesses — to decide what types of mortgage loans you can get and how much those loans will cost you.

But your credit score is just one of several factors that tell mortgage lenders if you can afford to borrow the amount you’re requesting and if you’re likely to repay it.

Here’s what you need to know about credits scores and home loans:

Minimum credit score needed by home loan type

There’s a different minimum credit score needed for each type of mortgage loan. Here’s a quick overview:

Loan type Min. credit score Description
Conventional 620
  • Most common
  • Available from most lenders
  • Requires private mortgage insurance (PMI) with less than 20% down
FHA 500
  • Can have lower credit scores, lower incomes, and/or higher debt
  • Federal government guarantee and borrower-paid mortgage insurance allow lenders to approve these higher-risk loans
VA None
  • Available to qualifying military service members, veterans, and some spouses
  • Federal government guarantee and borrower-paid funding fee protects lenders and helps those who serve our country
USDA None
  • Helps low- to moderate-income borrowers buy homes in rural areas
  • Government guarantee encourages lenders to offer these loans

Home loan options by credit score

If your credit score is too low, you might be disqualified from certain home loans. But there are many loan types that are forgiving of low credit scores. No matter your credit, here’s what types of mortgages you might be eligible for:

Bad credit score home loans

A bad credit score is usually one that’s lower than 640. While you might be able to get a home loan with bad credit, the potential drawbacks include:

  • Needing a larger down payment
  • Paying a higher interest rate
  • Spending more money on mortgage insurance premiums

Why would you spend more money on mortgage insurance? You would be paying FHA mortgage insurance premiums for the life of the loan instead of being able to drop them once you have 20% equity — or you might be paying a higher rate for PMI on a conventional loan until your equity reaches 20%.

With bad credit, you might be able to secure an FHA loan, a VA loan, a higher down payment conventional loan, or a USDA Loan:

  • FHA loan: Federal Housing Administration loans allow borrowers to have credit scores as low as 500, but you must put down at least 10% if your credit score is 500 to 579. Some FHA lenders only work with borrowers who have scores of at least 580.
  • VA loan: These loans have no minimum credit score requirement. However, VA loans are only available to qualifying military service members, veterans, and surviving spouses. Many VA lenders only work with borrowers who have scores of at least 620, and the average VA homebuyer in June had a 720 credit score according to Ellie Mae, a mortgage management software company.
  • Conventional loan: These home loans are available to borrowers with bad credit, but you’ll need a credit score of at least 620. Among all conventional home loan borrowers in June 2020, a mere 1% had a credit score lower than 650, according to Ellie Mae. So, depending on the lender, you might even need a higher score.
  • USDA loan: Rural mortgages through the USDA are for low- to moderate-income borrowers and have no minimum credit score. The home you want to buy must be in an area whose population is less than 35,000.

See: How Your Credit Score Impacts Mortgage Rates

Fair credit score home loans

With fair credit — a score of 640 to 699, typically — it becomes easier and less expensive to get a mortgage, but it can still be more difficult and more expensive than it would be if you had good or excellent credit.

If you can potentially get any type of mortgage with poor credit, then your chances only get better with fair credit, especially when it comes to two types of loans:

  • FHA loans: FHA loans are a popular choice for borrowers with fair credit. Nearly 60% of all FHA loans that closed in June 2020 went to borrowers with credit scores of 600 to 699, per Ellie Mae. With a credit score in this range, you’ll only need a down payment of 3.5% to get an FHA loan. But all FHA borrowers must pay an up-front mortgage insurance premium and monthly mortgage insurance premiums, which means you must be able to afford this additional cost.
  • Conventional loans: Once your credit score reaches 680, if you’re a low-income borrower, you might become eligible for a conventional loan with better pricing, even if you can only put down 3%. Mortgage lenders might require you to pay for PMI on any conventional loan with a down payment of less than 20%, but it could be less expensive than FHA mortgage insurance.

Good credit score home loans

Once your credit score climbs into the 700 to 749 range, you’re in the good credit score range for a home loan. Qualifying will usually be easier and loans will most likely be less expensive. All types of mortgages are available once you have good credit:

  • Conventional loan: A conventional mortgage becomes easier to get with good credit, even if you’re carrying a lot of debt relative to your income. Instead of needing a debt-to-income (DTI) ratio of 36% or less, you might get approved with a ratio as high as 45%. That means your existing monthly obligations (such as your student loan, car loan, credit card, child support, and alimony) and proposed mortgage payment must total no more than 45% of your gross income. If you’re putting down less than 20% on a conventional mortgage, a good credit score will reduce your PMI premiums.
  • Jumbo loan: If your income is high enough, jumbo loans become accessible with a credit score of 700 or higher.
  • FHA loan: These loans become less advantageous as your credit score increases because you’re more likely to qualify for a less expensive conventional loan.
  • VA loan: Veterans Administration loans are still a great option for those who qualify. The average VA borrower in June 2020 had a credit score of 733 if they were refinancing and 720 if they were buying, according to Ellie Mae.

Excellent credit score home loans

An excellent credit score of 750 and above is the best place to be when you’re shopping for a mortgage. It will help you get the lowest interest rate whether you want a conventional, USDA, VA, or FHA loan:

  • Conventional loan: With an excellent credit score, you’ll be able to get competitive bids from multiple lenders on a conventional loan. And, if you’re putting down less than 20%, an excellent credit score will help you get the most favorable PMI premiums.
  • USDA or VA loan: Qualifying borrowers with excellent credit might still choose a USDA or VA loan if they don’t have a down payment.
  • FHA loan: There’s little reason to get an FHA loan when you have excellent credit. You will probably qualify for a conventional loan and avoid paying the FHA’s mortgage insurance premiums. An exception might be if your DTI ratio, including your proposed mortgage payment, is 45% to 50% and you’ve been rejected by multiple lenders for a conventional loan.
Other factors your lender will consider for your mortgage rate:

  • Income: You’ll need a documented history showing two years of steady income in the same line of work.
  • Debt: Your debt cannot consume so much of your income that your mortgage and living expenses won’t be manageable.
  • Down payment: The higher your down payment, the less risky you are to lenders. The gold standard is 20% or more.

Find Out: How to Get the Best Mortgage Rates

What mortgage rate can I expect with my credit score?

In the table below, you can see how much your interest rate might be depending on your credit score, how much your monthly payment might be, and how much you’d likely pay in total interest.

This is based on a $200,000, 30-year loan and the interest rates as of Aug. 13, 2020.1

Credit score Interest rate Monthly payment Total interest paid
760-850 2.577% $798 $87,378
700-759 2.799% $822 $95,806
680-699 2.976% $841 $102,624
660-679 3.19% $864 $110,982
640-659 3.62% $912 $128,154
620-639 4.166% $974 $150,665
Note: All numbers here are for demonstrative purposes only and do not represent an advertisement for available terms.

Improving your credit score can get you a better rate and more

Improving your credit score for a home loan can benefit you in other ways besides lower mortgage rates. For example:

  1. With FHA loans: A better score can qualify you for a lower down payment — 3.5% instead of 10%.
  2. With fixed-rate conventional loans: If you have a credit score of 720 or higher and a down payment of 25% or more, you don’t need any cash reserves and your DTI ratio can be as high as 45%; but if your credit score is 620 to 639 and you have a down payment of 5% to 25%, you would need to have at least two months of cash reserves and a DTI ratio of 36% or less.

So, it’s always a good idea to improve your credit score if you can — to ensure you have the best options for a home loan.

Here are a few ways you can raise your score:

  1. Make on-time payments. Always pay all of your bills on time because on-time payments are a big part of what makes up your credit score.
  2. Pay down your debt. The lower your utilization percentage, the better. This tells lenders you’re being responsible and not maxing out all your credit cards and loans.
  3. Don’t open any new accounts if you don’t have to. Opening up a new account could bring your score down slightly because they cause hard credit inquiries. New accounts will also lower the average age of credit you have, so always keep this in mind when you open a new account.
  4. Don’t close any current credit card accounts. Keeping all of your credit card accounts open for more than just a period of time can help your credit score since it adds to the length of credit history.
  5. Clear up any errors on your credit report. Always check your credit score and report regularly to make sure there are no fraudulent accounts or mistakes.

Take the next step and get pre-approved

The only way to know for sure what kind of home loan you can get with your credit score is by getting a mortgage pre-approval. Once lenders take a detailed look at your finances and how much you want to borrow, you’ll have a much better idea of your strength as a potential homebuyer.

Credible Operations, Inc. makes getting an instant streamlined pre-approval letter easy. We let you adjust your down payment so that you can figure out how much home you can afford.

Ready to get pre-approved?

  • Instant streamlined pre-approval: It only takes 3 minutes to see if you qualify for an instant streamlined pre-approval letter, without affecting your credit.
  • We keep your data private: Compare rates from multiple lenders without your data being sold or getting spammed.
  • A modern approach to mortgages: Complete your mortgage online with bank integrations and automatic updates. Talk to a loan officer only if you want to.

Find Rates Now

1Calculated using the MyFico loan savings calculator

About the author

Amy Fontinelle

Amy Fontinelle

Amy Fontinelle is a mortgage and credit card authority and a contributor to Credible. Her work has appeared in Forbes Advisor, The Motley Fool, Investopedia, International Business Times, MassMutual, and more.

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Letter: Vote for Kiesha Preston | Letters

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The residents of Roanoke, Virginia, need to get out of the box of voting based on party affiliation. It’s time to vote for the best candidate to do the job.

Kiesha Preston is running as an independent and is the best choice for Roanoke City Council. When she was only three years old, she was troubled because a local Kroger store removed the kiddie carts. She asked me how to get them back so she could shop beside me. I told her to go to the manager and she did. She stated her case, and a few weeks later those kiddie carts were back in the store.

Kiesha also has presented a bill to Congress that was approved. The Virginia Domestic Violence Victims Protection Act prevents domestic violence victims from not being able to rent an apartment because of bad credit as a result of their abuser ruining their credit.

These are but two examples of Kiesha’s tenacity and getting results. We need people on council who have no agenda and are truly willing to work for the least of us.

Kiesha is not intimidated by those in power and will hold her own to help those who cannot help themselves. This is why she is the right person to get the job done.

Please do not be discouraged because you are tired of the same old same old where parties are concerned. You have another choice so please vote for Kiesha Preston. She has been working tirelessly on behalf of the people without being elected to an official office. Just imagine what she can do once she is officially on City Council.

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This One Credit Card Will Get You the Most Cash Back Right Now

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Let’s admit it, choosing the right credit card can be a stressful process. There are so many variables to consider—from annuals fees to credit score requirement—not to mention the various rewards and benefits each card offers, and how those align with your lifestyle and spending habits. Then there are those hidden fees and interest rates you have to reckon with. In other words, it takes a lot of work to make a truly informed decision when it comes to choosing a credit card that’s right for you. Perhaps a good cash back program is high on your credit card priority list because, well, who doesn’t like some extra money in their pocket?

To help you decide on the credit card that is going to get you the most cash back, the experts at personal finance site WalletHub compared more than 1,500 current credit card offers. From that large pool, they narrowed down the field to the cards that offer cash back rewards, comparing those offers based on initial bonuses, rewards earnings rates, annual fees, and more. From that analysis, here are the best credit cards that will get you the most cash back right now. And for more money matters, check out This Is the State Where Your Money Is Worth the Least.

8

Alliant Cashback Visa Signature Credit Card

Best for: Cash back on all purchases

Cash-back rate: 2.5 percent

Annual fee: $0.00 for the first year; $99.00 after that

What kind of credit you need to get one: Excellent

Learn more about the Alliant Cashback Visa Signature credit card here.

If you are worried about having buyer’s remorse after choosing a credit card, put that into perspective by checking out What You’re More Likely to Regret Than Anything Else You Do.

7

Discover It

Best for: People with bad credit

Cash-back rate: 1-2 percent

Annual fee: $0.00

What kind of credit you need to get one: Bad

Learn more about the Discover It credit card here.

6

U.S. Bank Cash+ Visa Signature Card

Best for: Cash bonus for good credit ($200.00)

Cash-back rate: 1-5 percent

Annual fee: $0.00

What kind of credit you need to get one: Good

Learn more about the U.S. Bank Cash+ Visa Signature Card here.

And to make sure you have money to pay off those monthly bills, avoid The Biggest Career Mistake You’ll Ever Make, According to Experts.

5

Chase Freedom Unlimited

Best for: No APR on purchases

Cash-back rate: 1.5-5 percent

Annual fee: $0.00

What kind of credit you need to get one: Good

Learn more about the Chase Freedom Unlimited credit card here.

And for more things that will help you and your family stay on the right financial track, check out The No. 1 Sign You Shouldn’t Buy That House, According to Realtors.

4

Capital One QuicksilverOne Cash Rewards Credit Card

Best for: People with limited-to-fair credit and looking for low annual fee

Cash-back rate: 1.5 percent

Annual fee: $39.00

What kind of credit you need to get one: Fair

Learn more about Capital One QuicksilverOne Cash Rewards Credit Card here.

3

Citi Double Cash Card—18 month BT offer

Best for: Flat-rate rewards

Cash-back rate: 2 percent

Annual fee: $0.00

What kind of credit you need to get one: Excellent

Learn more about the Citi Double Cash Card here.

2

Capital One Savor Cash Rewards Credit Card

Best for: Dining and entertainment

Cash-back rate: 1-4 percent

Annual fee: $95.00

What kind of credit you need to get one: Good

Learn more about the Capital One Savor Cash Rewards Credit Card here.

1

Blue Cash Preferred Card from American Express

Best for: Most cash back overall

Cash-back rate: 1-6 percent

Annual fee: $0.00 for the first year; $95.00 after that

What kind of credit you need to get one: Good

Learn more about Blue Cash Preferred Card from American Express here.

And for more helpful information delivered to your inbox, sign up for our daily newsletter.

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Possible Raises Series B and Moves Fully Remote | State

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SEATLLE, Oct. 20, 2020 /PRNewswire/ — Possible raises $11 million in new equity funding to expand the team and to provide additional products for its customers. Union Square Ventures led the round, with participation from existing investors Canvas Ventures, Unlock Venture Partners, Columbia Pacific Advisors, Union Bay Partners, Tom Williams, and FJ Labs. The company has also secured $80 million in new debt financing from Park Cities Advisors.

Furthermore, the company is now fully remote and recently onboarded software engineers from across the US and the globe. Possible is committed to distributed work and actively recruiting for a number of other remote roles.

Possible provides friendly access to capital and a simple way to build credit for people who otherwise would get a payday loan or get hit with a bank overdraft fee. The company uses real-time financial data, rather than a credit score, to qualify customers and provide funds instantly through its iTunes and Android apps. Unlike payday loans or overdraft fees, Possible loans are paid back in small installments over multiple pay periods to allow customers to catch their breath. By reporting on-time payments to the credit bureaus, Possible enables its customers to build credit history and eventually qualify for cheaper, longer term financial products. On average, customers with low credit scores see their scores increase by 70 points within 4 months.

Tony Huang, Possible’s CEO explains, “So many people who live paycheck to paycheck can’t afford to build credit history. We’re helping them do it for the first time while providing them with a friendlier and more affordable small-dollar loan.”

Since launching in June 2018, Possible’s given out loans to hundreds of thousands of customers, helping meet short-term cash needs while building credit history or establishing credit for the first time. These customers, often with bad credit or no credit history, are underserved by traditional banks. Possible fills that gap and provides financial access to those who need it most while giving them the means to climb their way out.

Gillian Munson, Partner at Union Square Ventures, explains the thesis behind their new investment, “Through tech innovation, data-driven insights, and a focus on the customer, Possible is well on its way to winning the hearts and minds of both consumers and regulators alike, and building a trusted brand that endures.”

A 2019 Experian study shows 34.8% of consumers are subprime and can’t access money when they need it. They pay $106 billion in punitive fees each year to the existing financial system for short-term credit products. These consumers are trapped in predatory debt cycles of payday loans and overdraft fees without the means to rebuild their credit or improve their financial health. While there has been a number of new tech-enabled products in this space, most lead to similar debt cycles and don’t address the harder issue of improving long-term financial health. That’s where Possible comes in.

Since the company is now fully remote, Possible is actively hiring talent across the globe. Tyler, Possible’s CTO, explains, “Being fully distributed allows us to access the talent pool of the entire world. Our success so far is a reflection of the quality of our people, and we believe hiring globally will allow us to find exceptional people to join us in achieving our mission.”

About Possible

Possible is a fintech company based in Seattle, Washington. The company provides a friendlier and easier way for customers to access capital while also building credit history and improving long-term financial health.

About Union Square Ventures

Union Square Ventures is a thesis-driven venture capital firm based in New York City. USV manages over $1 billion in capital across seven funds and focuses investments in portfolio companies with the potential to transform important markets.

About Park Cities Advisors LLC

Park Cities Advisors LLC (“PCA”) is a privately held, SEC-registered alternative credit manager based in Dallas, Texas. PCA is focused on private lending across the specialty finance and FinTech sectors and provides debt capital to companies across a variety of industries through asset-based financing transactions.

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