What Credit Score Do I Need to Buy a Home? : Financial Stress

The real estate home buying process can be scary, and getting a mortgage doesn’t make that stress go away. But can you really buy a house with a bad credit score? What credit score do you need to get a mortgage loan to buy a home?

By knowing what credit score you have and what credit score you need in order to buy a home, you can better prepare for qualifying for the mortgage loan you need.

Understanding Your Credit Score

The first step is to identify your current credit score. If you don’t know where to do this, Edukate recommends freecreditscore.com to do this. This site also allows you one free credit score pull every 30 days.

Once you know your credit score, use the following to understand what this score means for you and your housing options:

Credit Score Below 500

With a credit score below 500, you most likely won’t qualify for a traditional mortgage loan. Focus on building your credit score by reducing debt, avoid any credit inquiries like opening a new credit card, and speak with a credit advisor for advice on how to raise your score.

Credit Score 500-600

An FHA loan has a minimum credit score of 500 for a 10% down payment and 580 for a 3.5% down payment. You will need to pay insurance on the mortgage both upfront and over the course of the loan. The good news is that FHA loans have more forgiving requirements than other options. =)

Credit Score 600-700

Conventional Loan

The minimum credit score to buy a house with a conventional loan (the most popular type of funding) is 620 out of 850. Freddie Mac or Fannie Mae are government programs that can buy mortgages from lenders.

Most buyers can get conventional loans, and you can get a loan with backing from either program. As long as you have a good credit score, you won’t have problems securing funding.

Veterans Affairs (VA) Loans

For buyers who can’t afford a big down payment or don’t have a great credit history, Veterans Affairs (VA) loans are a great option. A private lender will issue the loan, and the Department of Veterans Affairs will back the loan or guarantee it.

While you don’t need a specific credit score for this loan, some lenders have a minimum. In that case, the lowest credit score to buy a house is 620, the same as a conventional loan.

Jumbo Loan

A jumbo loan is great if you need to buy a bigger property because it can cover more costs than a conventional loan. However, that also means the average credit score to buy a house with this loan is higher.

Jumbo loans that require a credit score will typically require at least 680 out of 850. Because of their size, the government will not back loans, so some lenders will require a better credit score as a form of a guarantee.

The Importance of a Good Credit Score

Having a good credit score for mortgage applications is crucial for the real estate home buying process. Not only can it increase your options and chances of getting a loan, but it may give you access to better loans.

You may be able to get a lower interest rate on your mortgage or loan estimate. Or you might be able to get a loan even if you don’t have the standard 20% down payment.

Make Real Estate Home Buying Easier

A good credit score opens tons of doors to financial freedom, including buying your first (or fifth) home. If you have a high enough credit score to get a mortgage loan, you can start to look for your dream home.

Then, you can start building a life you love, and you won’t have to worry about renting or moving around. Fortunately, you don’t need a perfect credit score – or a full 20% down payment – to get a mortgage.

Do you have a question about home buying? Let us know, we’d love to hear from you.

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This post was brought to you by Torii, a real estate brokerage serving the Greater Boston area, San Francisco Bay Area, and Los Angeles area. Buy a home with Torii and we’ll pay your closing costs. Learn more at ToriiHomes.com