Are you looking to buy a home but have concerns about a low credit score getting in the way? You may not have as much to be concerned about regarding the minimum credit to buy a house. Depending on the loan program, you can get a mortgage with a lower credit score than most people think. The real differentiating factor is what kind of loan you can get and how the loan terms will change.
With a low credit score, you’ll most likely be looking into an FHA loan to accommodate your needs. A traditional loan requires a higher credit score. If you can put more money towards a down payment with either type of loan, you could reduce interest rates and your minimum monthly payment for the property, although some lenders provide the same rates regardless of credit score.
Still, with each case operating in its own way, let’s take a more in-depth look at what you can expect from each program concerning the minimum credit to buy a house.
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The minimum credit to buy a house with an approved FHA loan
An FHA loan has a range of in their required minimum credit to buy a house, depending on how much money you’re putting down upfront. With the minimum required 3.5% down payment, you’ll need to have at least a score of 580 to buy your home.
On the other hand, if you can supply a 10% down payment or more, you can earn approval for an FHA loan with a credit score as low as 500.
If you have some financial troubles reflected in your credit score, don’t fret. An FHA loan helps get people into their first homes. If you are not a first-time home-buyer, you may still be able to qualify for an FHA loan, but it is not as likely. Instead, you’ll probably have to use a conventional loan.
The minimum credit to buy a house from an approved conventional lender
Your credit score needs to be higher for a conventional mortgage, but there are some other qualifications that a lender will be looking for. To start, they will want to see a credit score of at least 620. If you have that, they’ll also want to make sure
- Your debt to income ratio is lower than 43%
- You can make a down-payment of at least 3%
- Your loan conforms to loan limits
For a conventional loan, the loan limits usually hover just above $500,000. If you’re looking to get into a home that costs more than that, you will likely need to apply for a Jumbo Mortgage where the required credit score is higher, at 680.
Some other mortgage programs include VA loans and USDA loans. These programs don’t have any official minimum credit to buy a house, but lenders prefer to see a minimum score of 620 for the VA loan or 640 for the USDA loan.
Do you feel more confident in your ability to buy a house house now? Are there certain types of loans that you feel are a better deal for your financial situation than others?