Your Credit Score’s Impact On Your Home Buying Ability

You probably already know that your credit score is typically viewed as an indicator of your overall financial health. But how exactly does your credit score factor into your home buying ability?

Credit Scores and Mortgage Loans

First, in order to qualify for a mortgage, you’ll want to make sure your credit score is as high as possible. The actual minimum credit score required will depend upon both the financial institution you choose as well as the type of mortgage loan you’re interested in. 

For example, some lenders will accept a score of 500 or better for an FHA loan. However, down the road this will also mean they’ll require a higher down payment. It’s important to check on the specifics with your financial institution directly beforehand as well as understand the nuances of credit scores like we discuss below before you purchase a home.

The Minimum Credit Score Needed

The following are the general minimum scores accepted by many financial institutions that offer the type of mortgage listed. 

But it’s important to always remember that when it comes to loans, there always are exceptions and it can vary based on the financial institution. 

Conventional loans: 620+
FHA loans: 580+
VA loan: 580+
USDA loan: 620+
Home Possible loan: 620+
Fannie Mae HomeReady: 620+

Why Meeting The Minimum Shouldn’t Be Your Goal

It’s crucial to point out that the scores provided above are the bare minimum needed to qualify for each specified mortgage loan program. credit score

However, your goal as a buyer shouldn’t be to merely qualify for a loan.

Your goal should be to be well qualified for the mortgage loan. 

Two Reasons You Want To Be Well Qualified For Your Loan

These are the two major reasons why you want to be not only qualified, but well qualified for your mortgage loan.

First, just because your credit monitoring app shows that you have a 620 credit score, that doesn’t automatically mean you’ll qualify for a mortgage loan.

A lender will look very carefully at the amount of debt a buyer has accumulated. They will also consider other additional circumstances when making their decision.

For example, if it seems like there’s an issue with the buyer’s job history, then a lender might be hesitant to approve a buyer’s loan request. A credit score is only part of the equation when securing a mortgage loan. 

If that lender feels like the buyer is potentially risky, then their approval odds are low, regardless of their credit score.

The second reason that you want to be not just qualified, but well qualified for your mortgage loan has to do with snagging the best interest rate.

Thus far in 2019, the current interest rate is hovering at near record lows of 4% or so.

Yet, if a buyer has a 620 credit score, it’s highly unlikely he or she will be offered a rate at or below the 4% APR from a mortgage lender. 

The reason this matters is because even a mere half a percentage point can equal to tens of thousands of dollars more over the life of the mortgage loan.


While it’s ok to use the above list of credit scores for each type of loan as a general guide, you want to remember that those are the bare minimum. If you want to improve your credit score before buying a home, you’ll want to do more than just meet the minimum. To make sure you’re getting the best rates possible, you’ll want to work towards being well qualified for your mortgage loan. Being well qualified means you’ll hopefully not only land your dream home but save money over the lifetime of your loan!

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