What is a Good Credit Score to Buy a House?

It’s estimated nearly 6.5 million homes will be sold in the United States this year. The number of new households formed has been on the rise as well. More new homes are also going up.

You may be one of the people thinking about buying a home for the very first time this year. Whether it’s new or a resale, you’re likely thinking about how you’ll finance this major purchase.

You may even be wondering if you’ll qualify to get a mortgage. If you’re not sure, you may be thinking about your credit score. You might even ask, “What is a good credit score to buy a house?”

The good news is you don’t need to have the highest possible credit score to buy a house. In this guide, we’ll go over the impact different credit scores have on your ability to get a mortgage. Finally, we’ll offer some tips for improving your credit score.

Determining Your Credit Score

Credit bureaus determine your credit score. They compile information about how you use credit. This information determines what your credit score is.

Most credit scoring systems range from 300 to 850. A higher score indicates better credit.

Several different factors influence your rating. One major factor is whether you make loan payments on time. Another factor is whether you’ve ever had credit before.

Taking out a loan can sometimes even cause a temporary dip in your score.

How Your Score Affects Your Ability to Get Credit

Creditors use your score to check you as a prospect for a loan. If you always make your payments on time, you have low debt, and you’ve paid back several loans, you’re a very good prospect.

If you’ve missed payments or never had a loan before, creditors might see you as a risk. They’ll be less willing to extend credit. They may want to charge higher interest.

A mortgage is a special kind of loan, and the lender wants to be sure you can make payments. Your credit score is an important consideration.

What Credit Score is Needed to Buy a House?

We mentioned that credit scores range between 300 and 850. Someone with a credit rating of 700 is a safe bet. Someone with a credit rating of 350 seems much riskier.

People with poor or no credit may have a difficult time finding someone to lend them money.

If you’re looking for a mortgage, you may wonder, what does your credit score have to be to buy a house?

Generally speaking, your credit score will need to be higher than 580 to qualify for a mortgage. At that score, you’ll only be able to qualify for FHA mortgages. You’ll also need to put down 3.5 percent of the sale price.

If your score is between 500 and 579, you may be able to qualify for an FHA loan, although this is less likely. If you do qualify, you’ll need to put a 10 percent down payment on the house.

What Is a Good Credit Score to Buy a House?

“What credit score do I need to buy a house” is often answered with “it varies.” At the absolute least, you’ll need a credit score higher than 500. A credit score higher than 580 will make it easier to get the FHA loan.

There are other types of mortgages you may qualify for if you have a better credit score. What is a good credit score to buy a house?

A good credit score is 620 or above. If your credit score meets or exceeds 620, you’ll qualify for different kinds of mortgages. These include:

If you’re looking at a non-government lender, your credit score must be 620 or higher.

If you want to qualify for a USDA loan, however, you’ll have to have an even higher credit score. USDA loans are granted only to those who have a credit score of 640 or more.

A credit score of 700 is usually considered good. If your score is 740 or higher, you’re considered to have a great or excellent score.

The Impacts of Your Credit Score

We already noted those with poor or bad credit may find it much more difficult to find a loan or mortgage. If you do find a lender, they may want to impose stricter terms on your mortgage.

For example, they may impose a higher interest rate. Those with a great credit score will find they get the best offers. Those with a credit score higher than 620 may find their interest rate is half a percent higher than current rates.

Those with bad credit will see interest rates as much as two percent higher than the best-posted rate.

How to Improve a Credit Score

If you asked “what credit score do you need to buy a house” and discovered your own credit score doesn’t stack up, you may wonder what you can do.

The good news is credit scores can be improved. You can try some of the following tips:

  • Take a small credit building loan to make regular payments
  • Pay down a credit card balance
  • Ask collections agencies to do a pay for delete

These tips can help you improve your credit score quickly. Keep in mind that when you take out a loan, your credit score may decrease temporarily. Space out loans to keep your score high.

Get Approved for a Mortgage

Now you have the answer to “what is a good credit score to buy a house?” The good news is most homebuyers will have a credit score of 620 or higher. If you don’t, there are ways to improve your score.

Is your credit score in good shape? You might be ready for your first mortgage. Contact us now to find out what interest rate and the amount you may be able to qualify for.

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