The Minimum Credit Score Needed To Buy A Home Is...

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What Is The Minimum Credit Score For A Home Loan?


Getting a home is part of the classic American dream, but for many people, it’s a dream that can be very hard to achieve. While it’s always possible to buy a house with bad credit by paying cash, it’s not always feasible with peoples’ incomes. So, for most people, there will need to be a home loan involved. Though the housing finance market has gotten better in recent years, it’s still not totally easy to get a home loan.


In order to get a home loan, you will most likely need to have a down payment, proof of income, and the minimum credit score that the kind of loan you want to take allows. The minimum credit score needed to buy a home will vary depending on what kind of home loan you want to take out. Here’s a quick run-through of what you should expect.


  • VA Loans and FHA Loans – These two loans typically will require a bare minimum of 620 in order to be approved. In recent times, some FHA loan companies will allow a 580 for a minimum credit score. However, they often will require a much larger down payment as a result.
  • Conventional Loans – This loan category includes FRMs, ARMs, and I/Os. I/Os begin approvals at a minimum of 720. FRMs start approving borrowers at a minimum score of 620. A minimum credit score for an ARM currently stands at 640.


Of course, having a minimum credit score for a home loan doesn’t guarantee that you’ll get approved. In fact, having a lower echelon credit score can mean that you will be approved at all. What having the bare minimum credit score for a home loan means is that, assuming that every other condition is perfect, you might get approved for a loan.


Getting a home loan approval today means more than just a good FICO score. Here’s what else lenders look at…

  1. They will look at your debt-to-limit ratio. This is actually a major factor in your credit score as well. A borrower who tends to max out credit cards will have a harder time getting approved for a home loan because lenders see it as you already being stretched too thin.
  2. They also will look at your debt-to-income ratio. This isn’t a deciding factor in your credit score, but for any major loan, it will be a major decision making factor. Simply put, no bank will give a loan to someone who cannot possibly make ends meet while paying it. The higher your income, the more likely it is that you will be approved.
  3. A down payment can also be a big factor, too. It is true that an FHA loan can be approved with only 3.5% of the house’s value as a down payment. However, that doesn’t mean that every FHA loan will have that term, nor does it mean that every loan will allow you to make such a low payment. The higher the down payment you offer, the more likely it is that your loan will be accepted. It’s also worth mentioning that a traditional down payment for a house was 30%.


The bottom line is that having a bare minimum FICO score will not guarantee you the home of your dreams. The best chance you have at getting a good loan is by having a credit score that is above the minimum and having a good down payment. Then, with a little luck, you’ll get a home loan and better interest rate offers.

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