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How much credit score is needed to purchase a home in 2021?

It’s not easy to save money, which is why debt is just a fact of life. When you want to buy a house, you will need to get a mortgage.

Mortgages are basically home loans where you put your house up as collateral. You will have to make a down payment or make none depending on which type you can avail of.

To find out if you qualify for a mortgage, lenders will be looking at several factors. Chief and foremost of these is your credit score. Now, it’s not enough to get just one of your credit reports. You actually need to look at three FICO Scores from Experian, Equifax, and TransUnion. These are the three biggest credit bureaus, and more often than not, they are where mortgage lenders will be conducting their checks on you.

If you get three different credit scores from each, you will have to look at the middle number, not the average. This middle value will become your official FICO score for your application.

The real question that remains, however, is: does your FICO Score cut? Let’s find out.

The Minimum Credit Score Needed to Purchase a Home

Believe it or not, you can still get a home loan no matter your credit score. But here’s the catch, your options will be a lot more limited the lower your credit score gets.

Some people don’t even have credit scores. If you can live without a credit card in America, leaving no credit footprint behind is actually possible. When these people then want to buy a house, and they need a home loan, they go through a process called manual underwriting, where someone literally goes through all their available financial documents, receipts and bills, and whatnot, to find out if they have been paying their dues responsibly. Unfortunately, this can be a very long and tedious process, so more people would probably opt to have some lines in their credit report to apply for a mortgage.

If you have a credit score, even if you have the lowest you can get, at least one government-backed loan can help you out. Below, we’ll let you know what loan type this is and other kinds of mortgages that are worth learning about.


Minimum credit score required: 0

It’s true! No particular credit score is needed to buy a house if what you’re planning to get is insured by the U.S. Department of Agriculture. This means that you will need to purchase a house located in a rural part of the country.

With a USDA loan, they will hear you out on your situation because they will want to know why you have a low credit score, but this will not hinder you from qualifying for a mortgage.

There is also no minimum down payment required to get this type of mortgage, although we would recommend putting at least some money down so you can lessen your interest charges.

FHA Loan

Minimum credit score required: 500

We also have a government-backed loan insured by the Federal Housing Administration. You do have to make a down payment for this one, but it’s still not that hard to qualify if you consider that 99% of consumers have a credit score of at least 500 anyway.

You will need to prepare 10% of your home’s purchase price for a down payment. But if you happen to have a credit score of 580 and above, this number can go down to just 3.5 percent.

You will want to watch out for mortgage insurance, though. This is usually the only factor that puts people off of getting this kind of mortgage. You have to pay for insurance that will protect the lender, and you will be charged for it monthly until you can pay the whole loan!

Conventional Loan

Minimum credit score required: 620

If you want to avoid paying for insurance as much as possible, as well as retain the freedom to buy a house anywhere you want, you can apply for a mortgage insured by a private institution. This is called a conventional loan.

With these traditional loans, you can actually pay as low as a 3% down payment, and the higher your credit score gets, the better terms you can get. That translates to savings!

To skip (private) mortgage insurance, you have to make at least a 20% deposit right from the get-go. If you really can’t, though, you can wait until you can gain 22% home equity because then they just completely stop charging you for insurance.

VA Loan

Minimum credit score: 640

It’s a little harder to qualify for this last one because you will need to have served in the military. But it’s absolutely worth applying for VA loans, which the Department of Veterans Affairs obviously insures.

Because this government agency really does have this power, lenders are often more generous regarding terms, like the interest rate or the loan amount you can get. You also don’t have to make a down payment! And that’s why if you can qualify for this mortgage loan, it really is the only one you should be considering at this point.

Which Credit Score

Today, in 2021, the COVID-19 pandemic is still far from eradicated. Due to this, we can expect house prices to continue to soar as more people decide to move out of cities into more open areas.

If you can afford to wait a little longer, it might be better to delay any moving plans. But if you have no other choice, here are some of the things you might want to consider.

Although we have talked about minimum credit score requirements, these are not hard and fast rules as far as mortgage lending is concerned. It’s technically okay to settle for a 620 credit score, which will help you qualify for some conventional loans, but you will actually find lenders who will say no. So at this time, it would be best to still aim for a good credit score, and, technically speaking, that means a FICO score of 670 or higher. Anything below this number is actually bad credit.

With a 670 credit score, you will have a higher chance of getting approved for most mortgage loans, and you will be able to borrow more, which is very important in 2021. One of the things driving high market prices is the low supply of available homes, and to compete, buyers are even offering as high as $25,000 to $30,000 over the actual price of the home and in cash. So you will want to have at least one foot in the door by getting a pre-approval so you can close on a deal much faster.

Remember, it’s not that hard to improve your credit score, especially if you are not looking back on any bankruptcies or loans in collections. Here are some tips that will help you boost your rating.

  1. Get a credit card. Even if you already have a credit card, another one will help you tremendously in this journey. If you have no credit card to begin with, maybe that’s the problem because, with your credit score, credit history is very important. The more information on your credit usage, the better. Now, when you get this new credit card, you need to use it at least once a month. Using it only for small and necessary transactions improves your credit utilization and adds more details to your credit history. The credit card points you get from using it are just the icing on the cake. Depending on which card you get, you can earn rebates, freebies, or even air miles.
  2. Increase your monthly income. If you have lower credit, you may be really just struggling to pay your bills on time. Unfortunately, late payments are very, very hard to remove from your report, so you’ll have to make up for it by paying more responsibly. To do this, you just got to make more money and pay off as much debt as you can before you need to apply for a mortgage.
  3. Piggyback on a higher credit score. This one sounds a little out of the box, but many people actually do it, and it’s completely legitimate. If you have someone in your circle with exceptional credit, this means a credit score of 800 or better; you can ask if you can become an authorized user on their credit card. Obviously, this will be someone very close to you, like someone who trusts you, so that they’d be willing to put you on their account. Once you are an authorized user, their good credit history can start showing up on your own credit report and help you increase your score.

Credit card

There are many ways to get a mortgage, but you really have to work for it if you want to qualify for the best. But, hey, nobody said it was going to be easy! The good news is, with this bit, all you need is patience.

Good luck!

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