What Credit Score Is Needed to Buy a House?

Bill Nelson is a planning excellence lead consultant at Northwestern Mutual.

Buying your own home is an important financial milestone. And unless you’re ready to pay in cash, applying for and securing a home loan is a major step toward this milestone. When you apply for a mortgage, your lender will look into your credit score.

If you’re buying a home for the first time or just need a reminder, let’s dive into the details of what credit score is needed to buy a house. You’ll learn what goes into your score, optimal score ranges based on home loan types and more loan comparison information to help you through your home financing journey.

Credit score basics

Your credit score is like a report card that shows how you’ve handled debt in the past. It helps lenders predict how risky it is to loan you money.

Home loan lenders look for certain things in a borrower—and your credit score is the highest on their list.

Your credit score has a big impact on your mortgage because it helps secure a favorable interest rate with financial lenders and banks. There are a few types of credit scores out there, but the most widely used one is the FICO^® Score with a range of 300 to 850. (FICO stands for Fair Isaac Corporation, a company that developed the widely used three-digit credit score.) There are several types of FICO scores, and for home loans, lenders typically use FICO^® Score 5 (Equifax), FICO^® Score 4 (TransUnion) or FICO^® Score 2 (Experian).FICO^® Score 2 (Experian).

If you’re not sure what your score is, you can easily check your credit score. It’s free and should be a regular part of your financial routine.

Minimum credit score to buy a house

Lender requirements vary, but for most loan types, you need at least 620 for a conventional home loan. This credit score is below average, so you may have to borrow at a higher interest rate than someone with a better score. If your score is below 620, you could look into loans backed by the federal government. Several are described below.

Credit score factors

Factors that go into your credit score include:

• Your payment history (35 percent of a FICO score).
• Amounts owed (30 percent of a FICO score).
• Length of your credit history (15 percent of a FICO score).
• Your credit mix (10 percent of a FICO score).
• New credit (10 percent of a FICO score).

When you consider these credit score factors, you can work toward improving your credit over time.

Required credit scores for different types of mortgage loans

Buying a home usually involves taking out a mortgage, which is a loan that helps you pay for your house. Along with your money paid upfront, or down payment, a mortgage covers the cost of your home. You pay back the money over many years. It’s a way to gradually own your house while living in it.

There are several types of mortgage loans available, each designed for different needs. Some loans are perfect for first-time buyers, while others cater to those with specific financial situations.

Mortgage lenders generally prefer higher credit scores because these scores suggest you’re more likely to repay the loan on time. And higher scores often mean advantages like lower interest rates, reduced fees and less need for mortgage insurance. This can get you smaller monthly payments or a shorter term for the loan.

But keep in mind that requirements can vary from lender to lender. It’s always a good idea to understand their specific criteria and how they might affect your mortgage options.

Conventional mortgages

Minimum credit score: 620

When you get a standard (or conventional) mortgage loan from a bank, credit union or other private lender, you’ll need a credit score of at least 620. The government doesn’t back these loans—so lenders rely on credit scores to determine your creditworthiness.

If your down payment is less than about 20 percent, you might need private mortgage insurance (PMI), which makes the loan less risky for the lender.

FHA loans

FHA minimum credit score: 500

If you’re looking to purchase a home but are worried your credit score might be too low, a Federal Housing Administration (FHA) loan is a good mortgage term to learn. An FHA loan is a flexible way to eventually own your home because it’s insured by the government. (Something to keep in mind is that some real estate properties might not qualify due to strict FHA appraisal requirements.)

For an FHA loan, you need a credit score of at least 500 for a down payment of 10 percent or more. If your down payment is lower, the minimum credit score requirement is 580. To qualify for an FHA loan, you must have a down payment of at least 3.5 percent.

VA loans

Minimum credit score: 620

The U.S. Department of Veterans Affairs provides VA loans for those who have served in the military. While there isn’t a legally specified minimum credit score for VA loans, most private lenders require a score of around 620.

Unlike other home loans, VA loans often don’t require a down payment or private mortgage insurance. This makes it easier for veterans to become homeowners without needing a large upfront payment.

USDA loans

Minimum credit score: 640

The U.S. Department of Agriculture (USDA) loans support borrowers who don’t have the means for a large upfront payment, helping them achieve the dream of homeownership. These are for lower-income families buying homes in rural areas.

USDA loans are financially accessible with lower down payments, flexible credit requirements and reduced interest rates. While there’s no required minimum credit score for USDA loans, most lenders typically look for a score of around 640.

Jumbo loans

Required minimum credit score: 700

Jumbo loans are secured for real estate in expensive living areas or for luxury properties. Rates can sometimes be lower than those for conventional loans. Because they involve lending relatively large amounts of money, these loans carry more risk for the lender. Jumbo loans are also not backed by the government.

The minimum credit score required for a jumbo loan is higher than for other types of loans—typically around 700.

Get help for life’s big milestones

Knowing where your credit score stands can help you work toward improving it. And improving your credit score will have benefits far beyond just buying a home.

It’s also important to take time to learn important homeowning topics—like escrow and home equity—so you’re prepared when the time comes. The good news is you don’t have to do it alone.

Your Northwestern Mutual financial advisor can help you plan for big goals like homeownership by helping you design a comprehensive financial plan to protect and grow your money. Together with your advisor, you’ll choose the right mix of financial tools to achieve your goals—now and in the future.