What credit score do you need to buy a house? The answer is…it’s complicated!
There is no standard minimum credit score to buy a home. Each loan program and each lender has different requirements. Some loan programs allow borrowers to have low and no credit scores. Others require higher scores.
However, your credit score is not the only factor that affects your loan approval. Approval is based on your entire borrower profile! This includes your income, work history, assets, credit history, etc. Two borrowers can have the exact same credit score, and one may be denied based their specific loan application factors while the other may be approved.
See…it’s complicated!
FICO Scores, the only scores that matter
While many different systems out there provide credit scores, when it comes to home loans, FICO scores are the only credit scores that matter.
Your FICO credit report will have a score from each of the 3 bureaus: Experian, Transunion, and Equifax. When it comes time to get preapproved, mortgage lenders ignore the highest score and the lowest score. As a result, they only use the middle score for qualification purposes.
Minimum Credit Score to Buy a House
Below we’ve compiled the minimum credit score for the most popular home loan programs. It’s important to note, however, that having a minimum credit score does not mean that you will automatically qualify.
To find out what programs you qualify for, give us a call at 877-892-8222 or click here to apply online.
FHA
Federally qualified lenders issue FHA mortgage loans. The U.S. Federal Housing Authority, a division of the U.S. Department of Housing and Urban Development, insures them. These loans are an attractive option for many borrowers, not just first-time homeowners.
The minimum credit score to buy a home using FHA is 500. Borrowers with scores under 580 must have a 10% down payment. Homebuyers with no credit score may qualify with additional requirements.
VA
VA Home Loans are available to military personnel and veterans. This includes Reservists and members of the National Guard. Surviving spouses may be eligible in certain situations. Federally qualified lenders issue VA loans, and the United States Veterans Association guarantees them.
The Veterans Administration does not set a minimum credit score. However, lenders impose their own limits. Some lenders will go down to a 500 credit score. Additionally, some lenders will do loans for borrowers without a credit score.
Conventional
Conventional loans, also called conforming loans, offer many different loan programs. Each program may have unique qualifying requirements. Conventional loans meet the guidelines set forth by Fannie Mae or Freddie Mac.
In general, the minimum credit score for a Conventional mortgage is 620 if there is one borrower on the loan.
If there are two or more borrowers on the loan, some lenders will allow scores as low as 580, provided that all scores added together average at least 620.
Homebuyers with no credit score may qualify with additional requirements.
USDA
USDA home loans help people living in small towns or rural areas achieve homeownership. The USDA Guaranteed Home Loan program offers many benefits. These include flexible credit guidelines, competitive interest rates, and low monthly mortgage insurance rates.
The minimum credit score to buy a house with USDA is 550. Borrowers with no credit scores may also be eligible.
A note for Borrowers with No and Low Credit Scores
It’s not impossible to qualify for a home loan with a low credit score or no credit score! However, it can make it more challenging to qualify.
If you have a low credit score or no credit score, lenders will look more closely at other risk factors that you may have. This includes recent late payments, collection accounts, the amount of money you have in checking and savings, employment history, the time at your current job, etc.
If you don’t have a credit score, it means that the credit bureaus don’t have enough information about you. While there are some options available to borrowers without a credit score, most lenders will require that you provide proof of payment history on “alternative tradelines”. These are lines of credit or utilities that do not report to the credit bureaus. This may include rent, cell phone, electric, cable/internet, car insurance, etc.
Acceptable “alternative tradeline” accounts must meet certain criteria. The account must be in your name, it must be 12 months old, every payment must have been made on time every single month, and proof of payment must be provided on the creditor’s letterhead.
Getting Approved with Low or No Credit Scores
Do you have low credit or no credit? Take these steps to increase your chances of getting preapproved to buy a home:
- Make a larger down payment than is required.
- Have sufficient “reserves” in checking and/or savings accounts. Reserves are funds that are left over after paying your down payment and closing costs.
- Have low debt-to-income ratios. This ratio compares your existing debt to your pre-tax income. This includes accounts such as auto loans, student loans, credit cards, etc. Paying down existing debt will improve your debt-to-income ratio.
The best part about credit scores? They aren’t set in stone! It’s never too late to start working on improving your credit.
If our team can’t pre-approve you today, we’ll come up with a custom plan to help you get to where you need to be. There’s nothing to lose, so apply today!
Originally published June 8, 2018, updated June 3, 2024
