Buying a house is a major milestone and one of the biggest financial commitments most of us ever make. When you’re ready to become a homeowner, your credit score will play a central role in determining your eligibility for a mortgage and what terms you can get. So, what credit score do you need to buy a house?

1. Understanding credit scores

A credit score is a three-digit number that reflects your creditworthiness based on your credit history. Lenders use this score to assess the risk of lending you money. The most common credit scoring models are FICO and VantageScore, which range from 300 to 850. The higher your score, the better your creditworthiness in the eyes of lenders.

Credit score ranges:

  • 300-579: Poor
  • 580-669: Fair
  • 670-739: Good
  • 740-799: Very Good
  • 800-850: Excellent

2. Minimum credit scores for different mortgage types

The minimum credit score needed to buy a house depends on the type of mortgage you’re applying for. Different types of loans have different requirements:

Conventional loans

Conventional loans are not backed by the government and are offered by private lenders like banks and credit unions. To qualify for a conventional loan, you generally need a minimum credit score of 620. However, a higher score is preferred to secure better interest rates and terms.

Brigit tip: A credit score of 740 or higher can help you qualify for the best rates on a conventional mortgage.

FHA loans

FHA loans are insured by the Federal Housing Administration and are designed to help first-time homebuyers and those with lower credit scores. The minimum credit score required for an FHA loan is typically 580 if you want to make a down payment of 3.5%. If your credit score is between 500 and 579, you might still qualify, but you’ll need to make a larger down payment of at least 10%.

Brigit tip: FHA loans are more forgiving with credit requirements, making them a good option for buyers with less-than-perfect credit.

VA loans

VA loans are available to eligible veterans, active-duty service members, and certain members of the National Guard and Reserves. These loans are backed by the Department of Veterans Affairs and typically don’t require a down payment. While the VA doesn’t set a minimum credit score, most lenders prefer a score of at least 620.

Brigit tip: VA loans often come with more favorable terms, such as no private mortgage insurance (PMI) requirement, which can save you money over the life of the loan.

USDA loans

USDA loans are backed by the U.S. Department of Agriculture and are designed for low-to-moderate-income buyers in eligible rural and suburban areas. The USDA doesn’t set a strict minimum credit score, but most lenders look for a score of at least 640 to qualify for automated underwriting.

Brigit tip: If you qualify for a USDA loan, you might be able to buy a home with no down payment and competitive interest rates.

3. How your credit score affects your mortgage rate

Your credit score doesn’t just determine whether you qualify for a mortgage—it also affects the interest rate you’ll pay. Borrowers with higher credit scores are considered lower risk and are more likely to receive lower interest rates. Even a small difference in interest rates can significantly affect your monthly payment and the total cost of the loan over time.

Example: On a $300,000 mortgage with a 30-year term, the difference between a 3% and a 4% interest rate could mean paying thousands more in interest over the life of the loan.

4. Improving your credit score before buying a house

If your credit score is lower than you’d like, there are several steps you can take to improve it before applying for a mortgage:

  • Pay Your Bills on Time: Your payment history is the most significant factor in your credit score. Consistently paying bills on time can help improve your score.
  • Reduce Debt: Lowering your credit card balances can reduce your credit utilization ratio, which is another key factor in your credit score.
  • Avoid Opening New Credit Accounts: Opening multiple new accounts in a short period can negatively impact your credit score.
  • Check your credit report for errors: Errors on your credit report can drag down your score. Request a free credit report from each of the three major credit bureaus and dispute any inaccuracies.

Brigit tip: Improving your credit score even by a few points can help you qualify for better mortgage rates and save you money over the long term.

5. Other factors lenders consider

While your credit score is important, it’s not the only factor lenders consider when approving a mortgage. Lenders will also look at:

  • Debt-to-income ratio (DTI): Your DTI ratio is the percentage of your monthly income that goes toward debt payments. A lower DTI ratio indicates better financial health.
  • Employment history: Lenders prefer borrowers with stable employment and a consistent income history.
  • Down payment: A larger down payment can reduce the lender’s risk and potentially qualify you for better loan terms.

While the credit score you need to buy a house varies depending on the type of mortgage, a score of 620 or higher will generally increase your chances of approval and securing favorable terms. Improving your credit score before applying for a mortgage can lead to lower interest rates and significant savings over the life of the loan. Remember, buying a house is a significant financial decision, so take the time to understand your credit and take steps to improve it before embarking on your home-buying journey.