What Credit Score Do You Need To Buy A House?

Having a good credit score is important in many aspects of your life. Even though it’s intangible, your credit is one of your most important assets. Your credit score can play an important part in determining what kinds of loans you’re eligible for. And the higher your score, the better mortgage rate you can get.

No matter where you’re at in the home buying process, it’s important to understand what credit score you need to buy a house.

Do You Need Credit To Buy A House?

Unless you have a lot of money saved up or have a family member with a paid-off house, you’re going to need to get a mortgage buy a house. And since most people don’t have the savings built up to pay cash, you’ll want to make sure that you understand how credit and your credit score can affect your ability to buy a house. 

You can check out the differences between a mortgage and a personal loan, but for most people, credit and a mortgage are needed to buy a house. And just like most things in life, the better credit you have, the cheaper it will be in the long run, due to lower interest rates.

Minimum Credit Score To Buy A House

Most conventional loans will require a 620 credit score as the minimum score to buy a house. If you’re in the market for a jumbo loan (loans that are for larger amounts), you will likely need a credit score of 680 or higher. This is to account for the larger risk that the lender takes with larger loans. There are a few other loan programs that have lower credit score requirements – we’ll investigate those in more depth in the next section. 

First-Time Home Buyer Credit Score

There are also several loan programs that cater to first-time home buyers. These include FHA loans, VA loans and USDA loans. And while these loans often cater to first-time home buyers, they’re not the only ones who can use them. Here’s a quick rundown of these programs:

FHA Loans

Loans backed by the Federal Housing Administration can require a credit score as low as 500. If your credit score is under 580, you’ll likely need to put down 10% instead of only 3.5%.

VA Loans

VA loans are guaranteed by the Department of Veterans Affairs and targeted to veterans, servicemembers and their spouses. VA loans require a minimum credit score of 580 as well.

USDA Loans

USDA Loans that are primarily for home purchases in rural areas. To get a USDA-backed loan you’ll need a credit score of 620 or higher.

So if you’re wondering what’s the minimum score required to buy a house, you can see that it’s possible with one as low as 500.

What Should Your Credit Score Be To Buy A House?

Just because you can get a mortgage to buy a house with a credit score in the 500s doesn’t mean that it’s a good idea. The higher your credit score, the lower your mortgage interest rates. Every ⅛ of a point that you can lower your interest rate can save you thousands of dollars over the course of your loan. 

If you have a credit score in the 500s, it may be a smarter financial decision to improve your credit before you apply for a mortgage. There are two reasons for this: First, if you still have the same financial habits that caused your low credit score, it’s best not to compound them with a mortgage. Also, if you have any personal loans outstanding, it’s best to pay those off first since a personal loan can affect buying a house.

(SEE ALSO: Personal Loan Basics Learning Center)

What Kind Of Home Loan Can I Get With A 650 Credit Score?

With a 650 credit score, there shouldn’t be any limit to the type of home that you can get. You’ll likely need to have your home value be under the limits for a jumbo loan. In 2024, that means you’ll want a home loan at or below $766,550 in most areas of the country. As long as you stay under that limit, you should be able to qualify with most different kinds of loan programs.

Before applying for a loan, though, you’ll want to take a look at your credit report and clear up any outstanding negative marks. The time and money you put into raising your credit score before you apply for a mortgage will save you money over the course of your loan.

Final Thoughts

Taking a leap and buying your dream home is a very exciting experience. However, remember that credit plays a very important role in what type of home you can qualify for, with at least a 620 credit score being the foundation to start.

Remember not to overextend yourself with a home outside of your budget, as there are "house to home" alternatives. If things aren't entirely perfect once moving in, a home improvement loan can act as your solution.