Is Your Credit Score High Enough to Buy a House in 2022?

Planning to buy a house? Here are the typical credit score requirements for common mortgage loans.
Last updated May 5, 2022 | By Ben Walker, CEPF | Edited By Catherine McNally
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If buying a home is one of your financial goals, consider the role a healthy credit history plays in the homebuying process. You typically need a minimum credit score to qualify for most mortgage loans, and some lenders could have stricter requirements for certain borrowers.

But even if you don’t have perfect credit, there are loan programs with varying credit score requirements, and you can always work on improving your credit. Let’s see what the typical loan program requirements are and other factors to consider before buying a home.

In this article

What credit score do you need to buy a home?

If you’re wondering how to get a loan, the first step before applying is typically to check your credit score. You can get a free credit report from the major credit bureaus, including TransUnion, Equifax, and Experian, via AnnualCreditReport.com.

Checking your credit score with the credit bureaus could give you an idea of the type of loan you might be approved for, including its terms and interest rate. If you have a higher credit score, you’re likely to qualify for more options, which might include lower interest rates. Bad credit or a low credit score could affect your eligibility or result in higher interest rates.

Mortgage loans follow the same general guidelines, though the requirements could vary depending on the lender. Here are the minimum FICO Scores, one type of credit score, typically required for common mortgage programs.

Loan type Minimum FICO Score
Conventional 620
FHA 500
VA 620
USDA 640
Jumbo 700

Conventional loans

A conventional mortgage is a loan that’s backed by a private mortgage lender and not a government agency. You typically need at least a 620 credit score to qualify, though it’s possible that certain lenders could have stricter requirements.

FHA loans

FHA loans are backed by the Federal Housing Administration, which is a government agency. To get an FHA loan, you typically fill out a mortgage application through FHA-approved lenders, which could include banks, credit unions, and other lenders. These types of loans are often geared toward first-time homebuyers and could have lower credit score requirements.

You typically need at least a 580 credit score to qualify for an FHA loan with a 3.5% down payment. If your score is between 500 and 579, you would likely need a 10% down payment.

VA loans

VA loans are also backed by a government agency, but this time it’s the U.S. Department of Veterans Affairs (VA). These loans are often only available to current and former U.S. service members, as well as surviving spouses. These loans don’t have a fixed credit score requirement, but it’s generally recommended that you have a score of 620 or higher to qualify.

USDA loans

USDA loans are backed by the U.S. Department of Agriculture, a government agency. These loans are often designed to help families with below-average incomes and imperfect credit find a home. They’re also only meant for houses within eligible rural or suburban areas.

Similar to VA loans, these types of loans don’t have a fixed minimum credit score requirement. But the general recommendation to qualify is to have a score of 640 or higher.

Jumbo loans

As the name might suggest, a jumbo loan is a loan that’s larger than normal. Technically, a jumbo loan amount is higher than the 2022 conforming loan limit of $647,200 set by Fannie Mae and Freddie Mac, two government-backed companies that help support the U.S. home mortgage system. Jumbo loans typically require a credit score of 700 or higher to qualify.

How to improve your credit score to buy a home

Building your credit history and improving your credit score is a lifelong process, but it can be especially helpful if you’re planning to buy a home.

Here are a few ways to improve your credit score in anticipation of the homebuying process.

Make on-time payments

Avoiding missed and late payments on your credit accounts is crucial to building and maintaining a healthy credit history. Missing payments could result in an account being sent to collections. Your payment history generally accounts for 35% of your FICO Score.

To help stay on top of your credit payments, use autopay features that many financial institutions make available in online accounts. It could also make sense to take advantage of different financial resources to track your spending. Many of the best budgeting apps offer ways to manage your money to help avoid overspending or potentially missing a payment.

Lower your credit utilization

Your credit utilization ratio, or credit utilization rate, is often expressed as a percentage of how much of your total available credit you’re using. To calculate your rate, divide your total credit being used by the total available. For example, if you have multiple credit cards with a combined $10,000 limit and you have a combined credit card balance of $7,000, your credit utilization would be 70% (7,000 / 10,000 = 0.7).

You typically want to be using less than 30% of your total credit, as anything above could look risky to lenders and might negatively impact your credit score. Credit utilization focuses on revolving credit and generally accounts for 30% of your FICO Score.

Keep your oldest accounts open

It might seem like common sense to get rid of credit accounts you don’t use much, including an old credit card that doesn’t offer many benefits. But in the case of maintaining your credit score, closing any of your oldest accounts could have a negative impact.

This is because your average credit history length is a key factor in determining your credit score. Let’s say you have an account that’s 10 years old, an account that’s 3 years old, and an account you just recently opened. At the moment, you would likely have a decent average credit history length between the three accounts.

But if you close the account opened 10 years ago, your average credit history length would go down and you’d likely see a drop in your credit score. Credit history length generally accounts for 15% of your FICO Score.

Have a mix of credit

The two basic types of credit are revolving and installment. Revolving credit typically involves a set amount of credit you can use whenever you want. As you use credit and pay off your balance, you regain access to the same amount of credit. Revolving credit could include credit cards and home equity lines of credit.

Installment credit typically involves a set amount of credit with a fixed end date. You often make monthly payments toward the total amount until it’s paid off. Installment credit includes most loans, such as home loans, auto loans, and student loans.

Having a blend of these different types of credit on your credit report is a factor in determining your credit score. It may be possible to improve your credit score by using only one type of credit, but it’s often better to have a mix. Credit mix generally accounts for 10% of your FICO Score.

Don’t open too many new accounts

You typically have to open credit accounts to build your credit, but that doesn’t mean it’ll be helpful to open loads of new accounts. In fact, it’s likely to have the opposite effect.

One potentially negative impact would be that your average credit history length could go down with new accounts. Another factor is that too many hard inquiries, when a lender requests to see your credit file, could look risky to lenders. New credit generally accounts for 10% of your FICO Score.

Other factors to consider before buying a home

In addition to your credit score, here are some other factors to consider before buying a home.

Debt-to-income ratio

Most lenders will take a look at your debt-to-income (DTI) ratio when deciding whether they should offer you a loan. This ratio gives you and lenders an idea of how much debt you can take on, which might affect how big of a loan you could qualify for.

To calculate your DTI, divide all your monthly debt payments by your gross monthly income. Your gross income is how much money you make each month before taxes and other deductions are taken out. Let’s say you make $5,000 per month and have $1,500 in monthly debt payments. This would give you a DTI of 30% ($1,500 / $5,000 = 0.3).

The general rule is to have a DTI of 43% or less, though it could depend on the type of loan and each specific lender.

Down payment amount

Most mortgage loans require a down payment, which is money you pay upfront toward the cost of a home. The higher your down payment amount, the less money you would have to borrow from a lender. In certain cases, you might have to pay for private mortgage insurance if your down payment amount is less than 20% of a home’s purchase price.

Higher down payments can also lower your loan-to-value (LTV) ratio, or the amount of your mortgage compared to a property’s appraised value. Higher LTVs are often considered more risky for lenders.

Income and assets

Lenders typically look at multiple factors when determining whether they should lend you money. This often involves your credit history, but it could also include your income and assets.

If you have less than ideal credit, you might feel like you’re out of options. But ultimately, lenders want to make sure you can keep up with your payments. Your total income and savings could be helpful in securing you a loan deal.

Taxes and fees

If you haven’t been through the homebuying process before, be aware that there are more costs involved than the purchase price of a home. Additional costs could include the down payment amount, private mortgage insurance, interest payments, closing costs, property taxes, homeowners association fees, inspection fees, and more.

Whether you’re planning to buy a home this year, next year, or in 10 years, learning saving habits now could pay dividends down the road. Budgeting is a proven strategy for putting money aside for when you need it.

FAQs

What credit score do you need to buy a $250,000 house?

The credit score you need to buy a house typically depends on the type of mortgage loan you apply for. Each loan has its own requirements, which could include different minimum credit score qualifications. Certain types of loans don’t have minimum credit score requirements, but these are the typically accepted scores for common mortgage loans:

  • Conventional: 620 credit score
  • FHA: 500 to 580 credit score
  • USDA: 640 credit score
  • VA: 620 credit score
  • Jumbo: 660 to 720 credit score

How do you improve your credit score to buy a house?

Here are a few ways you could improve your credit score to buy a house:

  • Make on-time payments to your credit accounts.
  • Lower your total credit usage.
  • Keep your oldest credit accounts open.
  • Use different types of credit.
  • Avoid applying for new credit close to the time you want to look into mortgage options.

Can you buy a house with no credit score?

Yes, it’s possible to buy a house with no credit score, but it’s typically more difficult than if you have a healthy credit history. Lenders may not be as willing to work with you if you have little or no credit history, so it depends on what lending options are available in your area.

Bottom line

Credit often plays an important role in whether you’re able to be approved for a mortgage loan. If buying a home is a future goal, it makes sense to start building your credit history as soon as possible. This could open up opportunities for you down the road and might help you achieve certain financial goals.

When you’re ready to start the homebuying process, lenders are ready to help you get started. Top lenders can help guide you through the steps and requirements of securing a loan, which is often a major hurdle for prospective homeowners. For recommended options, check out our list of the best mortgage lenders.

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Author Details

Ben Walker, CEPF Ben Walker, CEPF, is a credit cards and travel writer at FinanceBuzz who loves helping others achieve their travel goals through financially sound decisions. For over a decade, he has been using credit card points and miles for the sole purpose of traveling the world. Ben is a Certified Educator of Personal Finance and has been featured in The Washington Post, MSN, Debt.com, and Finder.com.