Do I Need Excellent Credit to Buy a House?

Having a home is a part of the American dream. It gives us a place to raise our families, entertain our friends, create memories and live our lives. But if you're planning to get your house on mortgage, then "credit" becomes part of the conversation and the process. So what credit score is needed to buy a house?

As a general rule of thumb, the minimum credit score needed to buy a house typically starts around 620. But nothing is set in stone, as there are many other factors to consider as well when qualifying.



How Mortgage Lenders Determine Your Credit Score

A credit score is usually a three-digit number used by lenders to help them determine whether or not you're a good candidate for a loan. The number ranges from 300 to 850, and the higher your score, the better.

There are a few different ways that a lender can determine your credit score. The most common method is for them to pull a credit report that gathers your credit score and information from EACH of the three credit bureaus (and their associated FICO® scores) - Experian, Equifax, and TransUnion.

Lenders may also use their own internal scoring models to determine your creditworthiness.


What Type of Loan Are You Applying For?

There are different types of mortgage loans available, and each one has different credit score requirements. While lenders of these loans prefer borrowers with higher credit scores, they will still lend to those with lower scores under specific circumstances. Here are the types of loans and credit score requirements:

  • Conventional Loan: A conventional loan is not backed by the government. Conventional loans have strict credit requirements and typically require a down payment of 20 percent. The minimum credit score for a conventional loan is 620.

  • FHA Loan: An FHA loan is a mortgage insured by the Federal Housing Administration (FHA). These loans have more lenient credit requirements, and borrowers can put down as little as 3.5 percent for a down payment. The minimum credit score requirement for an FHA loan is 620.

  • VA Loan: A VA loan is a mortgage backed by the U.S. Department of Veterans Affairs (VA). These loans are available to eligible service members, veterans, and their spouses. The VA guarantees a portion of the loan, which helps lenders provide financing with more favorable terms. The minimum credit score for a VA loan can be as low as 580 under some circumstances.

  • USDA Loan: A USDA loan is a mortgage insured by the U.S. Department of Agriculture (USDA). These loans are available to eligible homebuyers with low-to-moderate incomes. The USDA guarantees a portion of the loan, which helps lenders provide financing with more favorable terms. The minimum credit score for a USDA loan is 640.


Can You Still Get Mortgage With A Low Credit Score?

What if your credit score doesn't qualify you to get any of the above loans?

Surprisingly, you can still get a loan even when your credit is not the best. But this comes with some conditions.

Consequently, you may end up facing higher interest rates, and you may also be required to make a larger down payment. Another option (often considered by some) is to get a co-signer with good credit scores to increase your chances of qualifying for the loan.


How We Can Help

The first step is knowing, so as to not blindly operate in the dark. Contact your favorite mortgage lender The A Team. With over 20 years of experience, we are a team of committed mortgage professionals with a proven track record of success, dedicated to making your mortgage journey as simple and easy as it can be. Contact us today, and let us help!




We hope this article was of value to you. For more great tips, bookmark our site and for all your mortgage needs, visit the A Team at TMFFMS.


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