Minimum Credit Score Needed to Buy a House

There are many factors that determine whether or not you’ll get a loan. Your credit score is only one the factors. Depending on which lender you use and what type of loan you are applying for, there may be different minimum requirements.

Conventional loans

If you are going for a conventional loan, the lender will look at several factors to determine your credit worthiness. Payment history, amounts owed, debt to income ratio, job history, current age, credit utilization ratio will all be taken into consideration. Your lender will also look at the scores competing lenders are accepting as well as the state of the economy. With a conventional loan, lenders are looking for a score of at least 650 to even consider you for financing.

Fannie Mae

Fannie Mae and Freddie Mac are the two government backed mortgage lenders. For a Fannie Mae loan, you will need a credit score of at least 620. Many other lenders look to Fannie Mae as an example and may follow suit, accepting 620 as a minimum score. Fannie Mae also strongly considers debt to income ratio. So even if you have a minimum score of 620, you will be denied if more than 45 percent of your income goes toward paying debt.

Government-backed loans

The Federal Housing Administration and the Veterans Administration have their own standards when it comes to credit scores. The FHA requires a minimum credit score of 580 and a 3.5 percent down payment. With a VA loan, no minimum credit score is required to qualify. VA loans also qualify for 100 percent financing.

Your score determines your interest rate

Although there are different minimum requirements to qualifying for a loan, the rate at which you get the loan is determined by your credit score. The higher your score, the lower your interest rate will be. For example, a 760 credit score could get you a 3.62% rate, whereas a 620 score could get you a 4.53% rate. This doesn’t seem like much, but this small difference could mean thousands of dollars over the life of the loan.



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