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What is the best credit score to purchase a home?

Relatively speaking, it’s not that hard to get a mortgage in America, especially if you’re getting a government-backed loan. Although it may take some time and involve a lot of paperwork, lenders tend to want to give you this home loan because, at the end of the day, mortgage lending is a big business.

With this in mind, you need to be smart when choosing which mortgage to get for your dream house. You’ll come across all sorts of financial experts during your mortgage journey who will have something to say about which deal you should get, so you will always want to look out for yourself. Sure, a deal may sound attractive if it means that you only have to pay a low monthly charge, but paying low doesn’t mean paying cheap. A low down payment can mean a higher interest paid overall.

When we’re talking about the best credit score needed to buy a house, we’re really talking about the best kind of mortgage you should get. By the time you finish reading this article, we hope to help you answer the question, “What is the best type of home loan for you and your dream house?”

Read on to find out.

Credit Scores

Credit scores are normally needed to find out if you qualify for a mortgage. But some people actually don’t even have credit scores. It may not be as common, but millions of Americans still don’t have a single credit card. So if they want to get a mortgage, what can they do?

Manual Underwriting

Most people go through a lot of effort to maintain high credit scores. However, a lot of people don’t know that you can still get a mortgage even if you don’t have any credit history at all. To do this, you have to go through manual underwriting.

The traditional kind of underwriting it’s usually done by a computer. For manual, instead of a computer, an actual person will go through your financial records or any documentation you can present so that they can measure your readiness to repay a loan. This does take longer than automated underwriting, but if you have no other choice, this is something you can fall back on.


Manual underwriting usually gets more important in case you decide to apply for a USDA loan. This is a government-backed loan guaranteed through the U.S. Department of Agriculture.

Under the USDA program, there is actually no minimum credit score required to get approved. You need to make sure that you are buying a house in a USDA-recognized rural area. When you apply for this loan, you might more easily get approved if you have a credit score of 640. But that’s just because your credit history will be easier to pull up on the computer. If you have a score below this number, your credit history will have to be scrutinized further, and someone will need to underwrite your application manually. Basically, if you have a score lower than 640, that means you have a Fair or Poor FICO Score (depending on what you have), and it’s essential to lenders to understand how you landed into this situation. They want to know: do you have the ability to repay the mortgage?

The USDA loan is a zero-down payment loan that tends to attract riskier borrowers. Zero down payment sure sounds great, but this means that you will be borrowing more money and paying more in interest, so if you have a lower credit score, you have a higher chance of defaulting on your loan.

Minimum Credit Score Requirements

Now, let’s say you have enough history in your file to generate a score. If you want to aim for a particular credit score, what should it be?

To answer this, you need to learn about other types of mortgages. You need to understand their own requirements so you can find out if they apply to your situation.

FHA Loan

Needless to say, the FHA loan is insured by the Federal Housing Administration, which is another government agency. Unlike the USDA program, you can buy a house with this mortgage anywhere in the country. However, like the USDA loan, this house must become your primary residence for at least one whole year.

The FHA loan mainly exists because the government wants an option that’s always available for first-time homebuyers, although it does not need to be your first time to get a mortgage to be qualified. This is an attractive choice for first-time buyers because the minimum credit score needed is just 500. If your credit score falls from 500 to 579, you can borrow up to 90% of your home’s purchase price. If you have a 580 or higher credit score, on the other hand, you can borrow as much as 96.5 percent!

Another great thing about the FHA loan is you can get your 10% down payment or 3.5% down payment from other sources aside from your savings. For example, you can approach down payment assistance programs or use gifted funds from relatives or friends.

Insurance Premium

Still, despite how good some of the terms are for the FHA program, this is an option that must be treated as a last resort if you really have no other way to buy a house. But, again, this is because of mortgage insurance.

Since the people getting FHA loans are riskier to lend to, the government wants some assurance in case any of the defaults. This comes in the form of charges that you have to pay over the life of your mortgage. That’s right. You have to pay for insurance that will not benefit you at all, and if you are taking out a 30-year mortgage, this will mean a huge amount of money. For this reason, a lot of people end up refinancing to get a cheaper type of mortgage. This way, they can stop paying for insurance.

Conventional Loan

If your credit score is more than qualified to get an FHA loan, you might already be eligible for what’s called a conventional loan. These are your Fannie Mae and Freddie Mac loans, but to be clear, these are not backed by the government. In fact, it’s the complete opposite.


Private lenders guarantee conventional loans, and this is why you have to pay for private mortgage insurance (PMI) that works in pretty much the same way that the insurance premium for FHA loans does. There is, however, a big difference.

If you can make a down payment of at least 20 percent for conventional mortgages, you can skip PMI outright. If you can’t pay this much, however, because, with conventional, you can put as low as a 3% down payment, you can still make PMI disappear eventually once you can gain at least 22% home equity.

Other Pros and Cons

Whereas FHA loans are more commonly known as low credit mortgages since they only require a minimum of 500, when we say conventional, this usually calls to mind good credit mortgages. But this is not necessarily the case.

To qualify for conventional, you really need a minimum score of 620. A 620 credit score does not even qualify as a good credit score in the FICO score range. There will be mortgage lenders out there who might require a higher credit score, but getting rejected at one shouldn’t stop you from applying at another.

Another thing that sets conventional loans apart from government-backed loans is that it doesn’t require you to buy a home intended for personal use. For FHA, you can have just one mortgage at a time because the house needs to become your primary residence. You can have as many loans as you want for conventional mortgages, and you can even rent out the houses.

VA Loan

Although fewer people might be eligible for this last loan type, it is still worthwhile to know that the Department of Veterans Affairs also insures mortgages.

As you can tell, this is only applicable to military service members, and this job benefit is also extended to their eligible families. But aside from having military experience, the VA loan requires a minimum credit score of 640 from applicants.

The VA loan program is very notable because it has some of the best interest rates in the market. And because a powerful government institution guarantees it, many lenders are more willing to give better terms for this kind of loan. You will even be able to get a much higher loan amount if you need it. Furthermore, there is no down payment required. There is, however, a VA funding fee that starts at 2.3% of your loan amount.

Overall, VA loans are pretty much still the very best the mortgage industry has to offer at the moment, so if you are qualified, we highly recommend that you look no further.


In general, as long as you pay your bills on time and you’re not already drowning deep in debt, you stand an excellent chance of qualifying for at least one kind of mortgage.

However, if you want to get a good interest rate and avoid extra charges on your mortgage loan, you will do well to have a credit score of 620 or higher. This way, you can qualify for conventional mortgages that will allow you to buy a home anywhere in the country.

Beyond credit scores, though, you also want to prepare enough funds to make a down payment. Remember, if you have at least 20% in the bank, this will already save you thousands of dollars by avoiding insurance. Making a larger down payment also means paying less in interest and gaining 100% home equity faster.

But if all else fails and you don’t meet the 620 cuts, you can always aim to refinance your mortgage.

The good news is, getting a mortgage might even improve your credit score. How? Although this additional debt will qualify as new credit in your report, and your score won’t actually start increasing until after a few months, as long as you retain your responsible paying habits. You also make good payments on your mortgage; these new lines in your payment history will be sure to earn you many points up the FICO scale.

Once your score of 580 or less can climb up to at least 620, you’ll be able to refinance to get a better mortgage loan.

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