What Credit Score You Really Need to Buy a House — And How to Get There

Unless you can buy a house in cash, you are going to need to get financed for a mortgage. And that means lenders are going to check your credit score when it’s time to secure that loan. So before you can get serious about plans for homeownership, you have to make sure you’re a feasible candidate for a loan with your current credit score. (And if not, you’ll need to put plans in place to improve it.)

So what credit score do you really need to buy a house? The short answer is… there’s usually not one blanket answer. (With apologies to the binary thinkers out there.)

While certain types of mortgages do explicitly require cut-and-dried minimum credit scores, many factors influence lending decisions for conventional mortgages — so you don’t necessarily know exactly what you’ll need to secure that paperwork. But it’s never too early to get educated on your current credit situation — and get yourself in the best position to give homebuying a go.

“Our preferred mortgage partners analyze our clients’ credit, their debt to income, their assets, their full financial picture,” says North Carolina-based top-selling agent Kimberly Pappalardo.

“They’re able to tell them what their credit score would need to look like if it’s not high enough right now, what opportunities are available to them using their current situation, and then fine-tune what programs they would qualify for and what best fits their needs.”

Here, we put together expert guidance that should help you determine how close you are to being ready for homeownership, or where you really need to get to make it happen.

Crossing the finish line to what credit score is needed to buy a house
Source: (Kolleen Gladden / Unsplash)

What’s a credit score?

First, the basics: Your credit score is a number calculated by a credit bureau, based on your personal credit repayment statistics, or more simply, based on your credit history. Lenders look at this number to evaluate how likely you are to repay your debts — or your mortgage, in the case of potential homeownership.

The whole field of credit scores ranges from 300 to 850. Higher scores mean lenders have a higher confidence in your likelihood to repay.

What goes into your credit score?

Five primary factors go into a person’s credit score. These are:

  • Your payment history (which accounts for 35% of your total score)
  • The total amount you owe (30%)
  • Your types of credit (10%)
  • New credit (10%)
  • The length of your credit history (15%) — (Yes, credit begets credit!)

Here’s what you can get at a range of credit scores:

If your credit score is 300 to 499:

…you’re not likely to qualify for much.

If your credit score is 500 to 579:

With a minimum credit score of 500, you can qualify for a Federal Housing Administration (FHA) loan with 10% down. The government backs these loans, which are made for for homebuyers with low to moderate incomes.

If your credit score is 580 to 619:

Or with a minimum credit score of 580, you can get an FHA loan with a smaller 3.5% down payment.

If your credit score is 620 to 699:

With a minimum credit score of 620, you start to qualify for conventional loans. These are traditional loans, not backed by the government.

If your credit score is 700 to 739:

If your credit score tops 700 at the high end of the spectrum, you can qualify for so-called “jumbo” loans, or mortgages for higher home values. The amount changes, but it’s generally anything over $484,350 as of 2019 in most parts of the country.

If your credit score is 740 or above:

With a credit score of 740 or higher, you’ll qualify for conventional loans with the best interest rates out there. Borrowers with higher scores get better rates on the cost of private mortgage insurance, required for down payments under 20%.

What credit score is needed to buy a house is different for a VA loan
Source: (Jon Tyson / Unsplash)

What are VA loans?

If you’re a veteran in the market for a home, you might qualify for a Veterans Affairs (VA) loan. The VA doesn’t set a minimum on this type of loan, but most lenders are looking for a minimum credit score of 620. Some will consider credit scores starting at 580.

What are USDA loans?

Buyers searching for homes in rural areas potentially qualify for United States Department of Agriculture (USDA) loans. For these, 640 is the minimum recommended credit score.

Like FHA loans, both VA and USDA loans are backed by the government. You go to an approved lender to get your loan, and then the government in turn guarantees it for the bank from which you borrowed.

What’s the average credit score to buy a home?

Credit Karma crunched member data to come up with the average credit score for first-time homebuyers in the U.S. — that number is 684, but it varies depending on what part of the country you live in.

Some areas of the U.S., such as around the Gulf Coast and the Appalachian states in the South, had an average credit score for first-time home buyers of 669 or less, whereas first-time buyers in the Northeast or on the West Coast tended to have a credit score of 700.

What credit score is needed to buy a house and how can you improve it?
Source: (Suzanne D. Williams / Unsplash)

How can you improve your credit if it’s not high enough?

“When a client doesn’t have the right credit score or their profile can be improved, it’s super important to know where they can improve and how they can improve,” Pappalardo says. “And it’s not necessarily paying off a credit card — that might not be the best way to improve their credit score. So talking with that lender and coming up with a strategic plan is really imperative.”

There’s no time like the present to take steps to improve your credit score. First, you can start paying all your bills on time going forward. Beyond that, you can start to pay off as much debt as you can — and keep your balances as low as possible on credit cards and other revolving credit.

If you don’t have enough credit to demonstrate a solid history, you can secure another credit card, or become an authorized user on someone else’s card. However, if you do have unused credit cards, it’s best for your credit score not to close them, according to Experian.

Of course, you should be doing your due diligence with any open credit cards: Review those statements regularly, and promptly dispute any areas of concern to resolve them as quickly as possible.

Ready for some good news? If you’re not there yet, it might not take you much time at all to get your credit in a better position for homebuying — even just a matter of weeks, according to Pappalardo’s own experience.

“We’ve had clients that were in a position that they were trying to reestablish credit after a divorce situation, and their credit looked very poor,” Pappalardo says. “After working for even a few weeks on some strategic payments and timing of those payments, they were able to improve their credit score to then be able to qualify for a mortgage and restart their life. And that’s really life-changing.”

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