What Credit Score Do I Need to Get a Mortgage?

What Credit Score Do I Need to Get a Mortgage? article image.

The minimum credit score required for a mortgage approval is ultimately determined by the lender, but score requirements also can depend heavily on the type of mortgage you're seeking.

Mortgage loans backed by federal programs have strict eligibility guidelines, including credit score requirements. Their minimum acceptable credit scores are often lower than on conventional mortgages, or mortgages that aren't insured or underwritten by government programs.

What Credit Score Do I Need for a Conventional Loan?

Lenders issuing conventional mortgages have considerable leeway in determining credit score requirements for their applicants. Lenders may set credit score cutoffs differently according to local or regional market conditions, and they may also set credit score requirements in accordance with their business strategies. For example, some mortgage lenders may prefer to deal only with applicants with credit scores above 740—considered very good or exceptional on the FICO® Score scale range of 300 to 850, while others may specialize in subprime mortgages aimed at applicants who have lower credit scores. Many lenders offer a catalog of mortgage products designed for applicants with a range of credit.

All that considered, the minimum FICO® Score required to qualify for a conventional mortgage is typically about 620.

What Is the Minimum Credit Score for an FHA Loan?

Loans backed by the Federal Housing Administration (FHA) are designed to help Americans get into their first homes. They are issued by the same kinds of lenders that provide conventional loans, including banks, credit unions and mortgage brokers, but must adhere to strict FHA guidelines. FHA loans are well-suited to applicants with limited or less-than-perfect credit histories who may not qualify for conventional mortgages.

You can get an FHA mortgage with a FICO® Score as low as 500, but applicants with scores ranging from 500 to 579 must make a down payment of at least 10% to qualify. Applicants with credit scores of 580 or greater can qualify with a down payment as low as 3.5%.

What Credit Score Is Needed for a USDA Loan?

Home loans issued by the U.S. Department of Agriculture (USDA) are designed to help low- and moderate-income individuals and families buy and improve homes in non-urban America (that is, the 97% of the country's geographical area that's considered rural or suburban).

There are three types of USDA home loans, including those intended for very low-income applicants, homeowners wishing to improve their property and qualified moderate-income applicants who want a low interest loan with a small down payment. Mortgage rates and borrowing limits on USDA loans vary according to prevailing property values in different parts of the country.

The USDA doesn't specify minimum credit score requirements for the loans it backs, but the minimum FICO® Score requirement nationwide is about 640.

What Credit Score Is Needed for a VA Loan?

Qualifying service members, veterans and surviving spouses can buy homes with little or no down payment and no private mortgage insurance requirements, thanks to housing benefits from the U.S. Department of Veterans Affairs, commonly known as VA loans. Issuers of VA loans have some discretion in setting minimum credit score requirements, but they may accept applications from borrowers with FICO® Scores as low as 620.

How to Get Your Credit Score Ready for a Mortgage

No matter what type of mortgage you seek, it's always advantageous to apply with the highest credit score you can manage. Meeting the minimum score requirement for a loan is just the start. Lenders also use your credit score to help set interest rates and fees on the loan, and generally speaking, the higher your credit score, the better your borrowing terms will be and the less you'll pay in interest and fees over the life of the loan.

If you're planning to apply for a mortgage in the next 12 months, you may be able to take steps starting today to spruce up your credit score so your loan application reflects the best credit score you can get.

Any credit score that helps you qualify for a mortgage you can afford can be considered a good score. Even so, most of us have room to improve our scores—and reap potential savings over the lifetime of a mortgage loan.