Buying a home is a major financial achievement, and a way to build generational wealth and security for you and your loved ones. Most people rely on mortgage loans to help cover the cost of their new home.
Lenders consider several factors during the mortgage application process, including your income, debt-levels, existing assets – and your credit score.
While credit scores range from 300 - 850, you don’t need perfect credit to buy a home. Most lenders prefer a score of 620 or higher, with scores of 700+ viewed more favorably. As a rule of thumb, you’ll face more scrutiny the closer your score is to those lower limits.
Lenders use your credit history to gauge how responsible you are as a borrower. So, before you start applying for mortgages, review your personal credit reports. You can request a free annual report from the three national credit bureaus at www.freecreditreport.com.
While it’s important to check your credit reports, they don’t include your actual credit score. Fortunately, most major credit card companies and some banks provide free credit scores for their customers. Poke around your company’s app or call customer service to find yours.
If you don’t have the credit score needed to buy a house, it doesn’t mean you’ll never be a home-owner. There are ways to build credit fast to achieve your financial goals.
Most traditional mortgages aren’t backed by a government program. These loans are best suited for borrowers with strong credit and money saved for a large down payment.
While there are no universal conventional home loan credit score requirements, most lenders follow similar guidelines. Generally, the minimum credit score needed for a conventional mortgage is 620 – but you’ll tap into better interest rates and other perks with a score of 740 or higher.
The VA (Veterans Affairs) home loan program helps connect veterans with straightforward affordable mortgages. While there are no explicit VA home loan credit score requirements, most lenders want to see a score above 620. Some lenders will approve borrowers with scores as low as 580, but these loans will be subject to greater scrutiny and conditions.
The FHA (Federal Housing Association) home loan program is often marketed as a product for first-time buyers. If you’re a return buyer, but have a lower credit score or are low on funds for a down payment, you may also consider an FHA loan. The minimum credit score requirement for an FHA loan is usually 580. But, as with most loans, higher credit may help you qualify for a lower interest rate.
The USDA (US Department of Agriculture) loan program seeks to make homeownership accessible for low-income individuals in rural areas. Government-backed USDA loans often offer lower interest rates and down payment requirements than conventional loans. In general the minimum credit score needed for a USDA home loan is 640.
Now that you know what credit score is needed to buy a house, improving your credit can help you access the best interest rates and loan offers.
With Stellar, you can build credit using the bills you pay each month already. It’s simple: just link your monthly expenses, and StellarFi reports your positive payment history to the three major credit bureaus: Experian, TransUnion, and Equifax.
Join StellarFi and start building credit to buy a house today.
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The StellarFi blog is intended to serve as an informational resource. While StellarFi can help you build your credit, we do not provide financial, legal, or accounting advice. Please consult a trusted advisor for financial, legal, or accounting guidance as needed.
On-time payment history can have a positive impact on your credit score. Nonpayment may negatively impact your credit score. StellarFinance, Inc. will report your on-time payments to Experian®, Equifax®, TransUnion®, and Innovis®. Impact on your credit may vary, as credit scores are independently determined by credit bureaus based on a number of factors including the financial decisions you make with other financial services organizations.
