Credit scores generally range from a low of 300 to a maximum of 850. While the Federal Housing Administration guarantees loans with credit scores as low as FICO 500 with 10% down, a score of 760 or higher qualifies you for the lowest mortgage rates available, no matter the loan product.
Locking in a low mortgage rate can save you thousands of dollars in interest over the life of a home loan and lower your monthly payments. Here’s a look at the credit score you’ll need to buy a house in 2024.
Read more: How to buy a house in 2024
What credit score is needed to buy a house?
There are five major types of mortgage loans, each with different qualifying minimum credit scores.
Conventional loan
Conventional loans are mainstream mortgages that most lenders offer. You'll typically need a credit score of 620 or better to qualify. A 3% minimum down payment is available to first-time home buyers. A credit score and down payment of more than the minimum can earn you easier conventional loan approval and a lower interest rate.
Read more: How to get a 3% down mortgage in 2024
Jumbo loan
Buying a more expensive home, generally something more than around $725,000 or so, requires qualifying for a jumbo loan. Lenders typically look for a credit score in the 700s for these higher-value loan amounts.
FHA loan
You can qualify for an FHA loan with a credit score of 500 if you put at least 10% down. With a FICO score of 580 or better, you'll only need a down payment of 3.5%.
Either way, lenders perceive low-credit-score home buyers as presenting a higher risk, so you'll likely pay a higher interest rate than someone with a credit score of 620 or higher.
VA loan
The Department of Veterans Affairs backs VA loans to military service members, veterans, and eligible surviving spouses, and it doesn't mandate a minimum credit score. But the VA doesn't issue the loans directly; authorized VA lenders do, and they typically look for a credit score of 620 or better.
Read more: What all the best mortgage lenders have in common
USDA loans
Houses and properties in rural areas and suburbs may be eligible for USDA loans. Low- and moderate-income borrowers will likely need a credit score of 580 or higher to qualify for a USDA mortgage.
Read more: How to get a mortgage in 2024
How credit scores work
Credit bureaus gamify your debt management skills by awarding points. The higher your score, the more creditworthy you are — at least, that's the algorithm's opinion.
Credit reporting agencies such as Equifax, Experian, and TransUnion track your payment history and FICO translates that data into a score. In fact, many scores. FICO has over a dozen scoring models for various industries and purposes.
Here are the factors that are used to calculate the credit score needed to buy a house, according to FICO:
Payment history (35%): The record of whether you've paid on time or not. You'll want to make sure this is accurate.
Amounts owed (30%): It's called "credit utilization" and measures your total debt, including credit card balances and things like vehicle and personal loans. Less is best.
Length of credit history (15%): Remember when you got your first credit card? FICO does. The longer you've had credit, the better.
New credit (10%): The number of new credit accounts you've opened recently. Opening too many can ding your credit.
Credit mix (10%): The different types of credit you have, such as installment loans, credit cards, and a mortgage. It's a bit of a mystery how this factors into the formula because the experts say you don't have to have one of each.
Read more: First-time home buyer tax credit: What to know in 2024
Other factors lenders will consider
Though your number is important, qualifying for a mortgage is about more than your credit score.
Debt-to-income ratio: Your debt is divided by your gross (before taxes and deductions) income. This is a major factor that lenders look at. You'll want your DTI to be in the low-40% range or less. The mid-30% range is a real sweet spot. For example, total debt (including your mortgage) = $2,000. Gross monthly income = $5,000. DTI = 40%.
Down payment: Some loan programs allow a down payment as low as 3%. The more down payment you can make, the lower your monthly payment will be.
Money in the bank: Lenders want to see cash available to cover the down payment, closing costs, and a little breathing room in your budget.
Employment: Proof of a steady job and a regular income is a must.
How to buy a house with bad credit
The FHA’s low FICO-500 hurdle proves that buying a house with bad credit is possible. The question is: should you?
If your credit score is in the 500 range, taking some extra time to pay all bills on time and in full each month will steadily improve your score and set you up for long-term homeownership success later.
Read more: Is 2024 a good time to buy a house?
How to improve your credit score
It's simple, but that doesn't mean it's easy. The path to improving your credit score is:
Reduce debt. Pay off credit card accounts, but don't close them. That will build your available credit.
Pay on time. Aim for zero late payments.
Correct any errors on your credit report. You can get your report for free at annualcreditreport.com.
Each month you pay down debt — on time, every time — you're awarded points. Getting a higher credit score is a long game worth winning.
FAQs
The minimum credit score needed for most mortgages is typically around 620. However, government-backed mortgages like Federal Housing Administration (FHA) loans typically have lower credit requirements than conventional fixed-rate loans and adjustable-rate mortgages (ARMs).
What is the minimum credit score needed to buy a house? ›
For a conventional mortgage in California, you typically need a minimum score of at least 600. If you qualify for certain government-backed loans, however, you may be able to buy a home with a score as low as 500.
What credit score is needed to buy a $400,000 house? ›
Your credit score has less bearing on your ability to get a mortgage than you might think. The minimum FICO score for a conventional loan is 620. The best rate comes with a score of 740 or higher.
Can you buy a house with a 600 credit score? ›
Yes, you can buy a house with a 600 credit score — but it would be less challenging if your score were higher. A 600 score will not be high enough to qualify for a conventional home loan, so look into FHA loans, which have lower requirements: 500 with a 10 percent down payment, and 580 with a 3.5 percent down payment.
What credit score is needed to buy a $300K house? ›
What credit score is needed to buy a $300K house? The required credit score to buy a $300K house typically ranges from 580 to 720 or higher, depending on the type of loan. For an FHA loan, the minimum credit score is usually around 580.
How can I raise my credit score 200 points in 30 days? ›
How to Raise Your Credit Score by 200 Points
- Get More Credit Accounts.
- Pay Down High Credit Card Balances.
- Always Make On-Time Payments.
- Keep the Accounts that You Already Have.
- Dispute Incorrect Items on Your Credit Report.
If you make $70K a year, you can likely afford a new home between $290,000 and $310,000*. That translates to a monthly house payment between $2,000 and $2,500, which includes your monthly mortgage payment, taxes, and home insurance.
How much do you have to make a year to afford a $250,000 house? ›
If you follow the 2.5 times your income rule, you divide the cost of the home by 2.5 to determine how much money you need to earn annually to afford it. Based on this rule, you would need to earn $100,000 per year to comfortably purchase a $250,000 home.
How much house can I afford with a 60k salary? ›
The 28/36 rule holds that if you earn $60k and don't pay too much to cover your debt each month, you can afford housing expenses of $1,400 a month. Another rule of thumb suggests you could afford a home worth $180,000, or three times your salary.
How much do you need to make to afford a $300k house? ›
With a 5% down payment and an interest rate of 7.158% (the average at the time of writing), you will want to earn at least $6,644 per month – $79,728 per year – to buy a $300,000 house.
Most negative items should automatically fall off your credit reports seven years from the date of your first missed payment, at which point your credit score may start rising. But if you are otherwise using credit responsibly, your score may rebound to its starting point within three months to six years.
How fast can I increase my credit score? ›
Remember, building credit takes time and credit scoring models are based on your activity and account history over time. Simply put, one month of positive on-time payment history is great, but six to 12 months of positive payment history is better and will have a greater impact.
How long does it take to improve your credit score by 100 points? ›
In fact, some consumers may even see their credit scores rise as much as 100 points in 30 days. Steps you can take to raise your credit score quickly include: Lower your credit utilization rate. Ask for late payment forgiveness.
How much income do I need for a $400,000 mortgage? ›
Assuming a 30-year fixed conventional mortgage and a 20 percent down payment of $80,000, with a high 6.88 percent interest rate, borrowers must earn a minimum of $105,864 each year to afford a home priced at $400,000. Based on these numbers, your monthly mortgage payment would be around $2,470.
How much is a 20% down payment on a $350 000 house? ›
To make a 20% down payment on a property with a $350,000 mortgage, you would need $87,500. Many buyers make lower down payments, however. Some as low as 3%.
How much income do I need for a 200K mortgage? ›
So, by tripling the $15,600 annual total, you'll find that you'd need to earn at least $46,800 a year to afford the monthly payments on a $200,000 home. This estimate however, does not include the 20 percent down payment you would need: On a $200K home, that's $40,000 that needs to be paid in full, upfront.
Can I purchase a home with a 580 credit score? ›
You can get a mortgage with a credit score as low as 620, 580 or even 500, depending on the type of loan. Some mortgage lenders offer bad credit loans with more flexible qualifying requirements but higher costs. Others offer free credit counseling to help you improve your score before applying for a loan.
What credit score do you need for a $250000 mortgage? ›
To qualify for a conventional loan, you'll need a credit score of at least 620, though some lenders may choose to approve conventional mortgage applications only for borrowers with credit scores of 680 and up.
How much can I borrow with a 580 credit score? ›
You can borrow anywhere from a few thousand dollars to $100,000+ with a 580 credit score. The exact amount of money you will get depends on other factors besides your credit score, such as your income, your employment status, the type of loan you get, and even the lender.
How much of a home loan can I get with a 650 credit score? ›
Your credit score typically won't affect the home loan amount you're able to receive. Instead, it will affect the interest rate of the loan. The lender will determine how much you can borrow based on a number of factors like your income, debt-to-income ratio, and more.
