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What is a Good Credit Score to Buy a House?

December 23, 2022

Are you out looking for a new house and worried about whether or not your credit score will be good enough to get approved? Wondering what is the minimum credit score required to buy a house?

Most sources state that you need at least a score of 620 to qualify for a mortgage loan. However, that’s not entirely accurate. The credit score needed to buy a house depends on the type of loan you’re looking to take out, as well as a few other factors like the amount of your down payment.

This confusion is (part of) why many people dread this process and want assurance that they can secure financing with their current credit scores. We’re here to let you know that understanding your credit score is paramount when purchasing a home, but there is some flexibility regarding the exact score you need. 

Read on as we explain what qualifies as a good credit score to buy a house and how you can improve yours to qualify for your dream home.

What Credit Score Do You Need to Buy a House?

As mentioned above, while most sources state that the lowest credit score to buy a house is 620, that’s not always the case. 

For example, it’s possible to get a mortgage with bad credit if you have a large down payment (in some cases). Buying a house with poor credit is also possible if you look for loan options outside your standard mortgage loan.

So, what should your credit score be to buy a house? Here’s a brief breakdown of the minimum credit score needed for various types of mortgage loans.

Conventional Loan: 620

The most widely used form of home financing is the conventional loan. These loans are popular because they offer straightforward approval procedures and low interest rates. However, they do come with a pretty strict minimum credit score of 620.

Along with offering lower interest rates than other types of mortgage loans, there’s the added benefit of simplicity in terms of accessibility. You can access these loans via mortgage lenders, brokers, and credit unions.

To qualify for a conventional loan, you’ll need to:

  • Meet minimum credit score requirements
  • Complete a mortgage application
  • Submit lender-required documentation
  • Agree to a full credit history check

Lenders will review your credit score, credit history, and documentation to approve or deny your application. If approved, you’ll enjoy interest rates slightly lower than other loans, such as Jumbo loans.

FHA Loan: 580

FHA loans are even more accessible for most homeowners, as they only require a 3.5% down payment (versus the standard 20%) and come with interest rates that don’t vary based on your credit score. However, most FHA lenders want a minimum credit score of 580.

Aside from that. It’s important to consider that, depending on how competitive the market is, you could end up paying more over the life of the loan than if you had opted for a conventional loan. However, with a lower barrier of entry, they’re a great option for those with less-than-great credit.

VA Loan: 580

Like FHA loans, the minimum credit score needed for a VA loan is 580. However, the one caveat is that you have to be a veteran or active-duty service member to qualify for the loan, as the Department of Veterans Affairs backs them.

Overall, these loans are often great options for veterans or active service members as they come with lower interest rates than conventional loans, are often available for 100% of the home value, and never require mortgage insurance.

You will need a Certificate of Eligibility to qualify for a VA loan, though.

USDA Loan: 580

Interested in buying a property in a rural area? A USDA home loan might be a great option for you. This USDA program allows homeowners with credit scores of 580 or higher to access mortgage loans to purchase housing in lower-density areas of the country.

The trade-off for moving a bit outside of the city? You don’t have to make a down payment, and interest rates are usually at least 0.50% lower than those of conventional mortgage loans. 

Don’t meet the minimum credit score requirements? Don’t worry; the USDA often makes exceptions for those with extenuating circumstances. So it’s still worth a try.

Jumbo Loan: 680

A Jumbo loan is a home loan that exceeds the limits set by government-backed mortgage programs such as Fannie Mae and Freddie Mac. 

These loans are typically used to finance high-value properties or properties in areas with above-average property values. Since Jumbo loans represent more risk to the lender due to their larger size, the minimum credit score required to qualify is typically slightly higher than that required for a conventional loan. 

While there is no “set” minimum credit limit, generally, borrowers must have a credit score of at least 680 to be eligible for a Jumbo loan, although some lenders may require a higher score.

How Credit Scores Affect Your Mortgage

As you can see, your credit score is a crucial factor that determines your ability to secure any type of mortgage loan. However, getting a mortgage loan is about more than having a “good” score. It’s also important to understand how scores are calculated to determine your eligibility and how they affect the interest rates on your loan.

FICO Score vs. Credit Score: How Credit Scores Are Calculated

When it comes to FICO score vs. credit score, do you know what the difference is? A FICO score is a type of credit score used by lenders to evaluate a borrower’s creditworthiness. 

While there’s no one comprehensive formula for calculating credit scores, FICO’s calculation methodology is the most commonly used by lenders. It takes into account factors such as your payment history (whether you have lots of missed payments or not), how much you own, length of credit history, the types of credit used, and new credit, among others. 

In contrast, other credit scoring models, such as VantageScore, use a slightly different weighted average method, analyzing many of the same metrics as FICO scores. The key difference between these credit scoring models lies in the specific calculation model, so you need to check your credit reports and scores regularly to take proactive steps toward achieving financial health.

Which do mortgage lenders use? Most use FICO score 5, which is slightly different from FICO 8. FICO score 5 is slightly stricter in that it is less forgiving of any unpaid debt you might have. FICO score 5 also relies only on reports from Equifax, not TransUnion or Experian.

How Credit Scores Affect Your Mortgage Rate

Having a good credit score isn’t just about being able to qualify for a mortgage loan; they also significantly impact your mortgage rate. When applying for a mortgage, lenders use your credit score and credit history to determine how risky it would be to lend money to you; they also use it to determine the interest rate they offer you. 

Typically, the higher your credit score, the lower the interest rate you'll be offered, reducing the total amount of interest paid over the life of your loan. Conversely, if you have a lower credit score, you will likely see a higher interest rate, which translates to higher mortgage payments overall. 

For example, here is a brief breakdown from Bankrate regarding the differences in interest rates based on your credit score for a 30-year fixed mortgage loan of $300,000.


As you can see, maintaining a healthy credit score can save a lot of money on your mortgage in the long run. For example, working to boost your score from 620 to 720 could save you over $98,000 in interest paid over the life of your loan. Even a small boost from 675 to 685, just ten points, could potentially help you save over $15,000.

How to Prepare Your Credit for a Mortgage

Preparing your credit for a mortgage is an essential component of home financing. This is because, as mentioned above, ensuring that your credit score is in optimal shape can help you save thousands of dollars when it comes to your mortgage payments. 

Start by checking your credit report for errors, and correct any mistakes. Next, reduce your credit utilization ratio by paying down high balances on credit cards and other forms of credit. 

Avoid opening new lines of credit before applying for a mortgage, as this can negatively impact your credit score. Instead, focus on maintaining healthy financial habits, such as making all of your payments on time and in full each month. 

Lastly, maintaining a diverse mix of credit types, including revolving and installment credit, can help improve your credit score. By following these steps and preparing your credit, you can confidently pursue mortgage options and secure the best possible rates available.

Improve Your Score With Cheese Credit Builder

Don’t meet the minimum credit score requirements to buy a house? Begin your jaourney towards financial stability with Cheese Credit Builder Loans boasting customizable terms starting at $24/month. 

You can repay the loans in either 12 or 24 months, giving you flexibility in designing a payment plan that works best for your lifestyle. And with Cheese's Autosave feature, you won't have to worry about missing any payments; we'll handle it all for you. 

Plus, getting approved for a Cheese loan doesn't require an upfront fee or a credit check, so you can focus on taking the first step to improve your credit score instead of worrying about a hard pull. 

Click here to learn more and start building your credit with Cheese today.

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