What Credit Score Do You Need to Buy a House?

Your credit score is a major factor in qualifying for a home loan. Here are the score requirements for popular loan programs.

FHA – Federal Housing Administration
(Often referred to as a first-time home buyer’s loan; although, you needn’t be a first time buyer to get it.)
580 to 620 (depending on the lender and other credit factors)

HomeReady
(Program designed for first-time buyers with average or below incomes.)
620

Conventional 3% down
720

VA – Veterans Administration
500 to 620 (depending on the lender and other credit factors)

USDA – U.S. Dept. of Agriculture
640 (most lenders)

Subprime Loan
No score required with sufficient down payment (Usually 30% to 40% down payment required. Interest rates from 8% to 12%.)

IMPORTANT TO KNOW

• Lenders use your mortgage credit score, not the consumer credit score you get from a free site.
• Lenders use the middle score of three. Scores are not averaged together.
• When there are two or more people on the loan, the score of the person with the lowest score is used.
• Credit score is only one factor in credit qualification. Other factors are public records (such as foreclosure, bankruptcy, judgements, liens), last 12 months’ pay history, etc.

BUY NOW OR WAIT FOR A HIGHER CREDIT SCORE?

Is it better to buy a home with a low score and higher interest rate, or does it make sense to wait until your credit has improved?

That depends, but in general, if you can raise your score in three

months, it is better to wait and take the lower interest rate. On the other hand, if it is going to take a year or longer to raise your score and if house pricing are rising in your neighborhood, then I would buy the house now and refinance in a year or two. That way, you can build wealth in equity while your credit is improving. Most people cannot save money as fast as prices are going up. That said, it is an individual situation that you should discuss with your loan officer.