Highlights:
- Credit scores are one factor mortgage lenders consider when evaluating you for a loan. Lenders also use your credit scores to help set your interest rate and other loan terms.
- Most conventional mortgages require first-time homebuyers to have a minimum credit score of 620 for approval.
- First-time homebuyers whose credit scores don't hit the standard minimum may still be able to qualify for a mortgage through FHA, VA or USDA programs.
The stakes are high for first-time homebuyers applying for a mortgage. It’s only natural to wonder how your credit scores will impact your mortgage application.
Here’s what to know about minimum credit score requirements as a first-time homebuyer.
How do my credit scores affect my chances of getting a home loan?
Credit scores are three-digit numbers, typically between 300 and 850, that reflect your past behavior as a borrower. They are designed to indicate your creditworthiness, or the likelihood you will pay your bills on time.
Mortgage lenders consider credit scores as one factor when evaluating you for a loan. Along with other factors, such as your income, your credit scores can also affect the amount of money you qualify for.
There's no magic number that guarantees you’ll be approved for a mortgage. But, generally speaking, higher credit scores increase your chances of securing a loan.
Once you’re approved for a mortgage, your lender uses your credit scores to help set your interest rate and other loan terms. Generally, lenders offer the lowest interest rates and best terms to the lowest-risk borrowers.
Is there a minimum credit score for first-time homebuyers?
Credit score requirements vary from lender to lender. However, for most conventional mortgages, homebuyers need a minimum credit score of 620 for approval. If your score is below this benchmark, you are unlikely to qualify for a conventional loan.
Are there home loans available for first-time homebuyers with low credit scores?
Luckily, options exist for first-time homebuyers whose credit scores fall below 620. Certain first-time homebuyers may qualify for special government-sponsored loans with more lenient approval requirements.
How can first-time homebuyers improve their credit scores?
Low credit scores don’t have to stand in the way of homeownership for first-time homebuyers. Even a little effort toward improving your credit scores can go a long way.
Before you begin house hunting, try setting a budget and making consistent, on-time payments on any outstanding debt. Although you’ll need to focus most of your attention on improving your payment history, don’t overlook the other factors used to determine your credit scores, such as:
- How much debt you owe
- The length of your credit history
- Your credit mix
- The age of your credit accounts
It’s also important to regularly review your credit reports and credit scores as you work to improve your credit history.
FAQs
Credit score requirements vary from lender to lender. However, for most conventional mortgages, homebuyers need a minimum credit score of 620 for approval. If your score is below this benchmark, you are unlikely to qualify for a conventional loan.
What is a good credit score to buy a house for the first time? ›
Some types of mortgages have specific minimum credit score requirements. A conventional loan requires a credit score of at least 620, but it's ideal to have a score of 740 or above, which could allow you to make a lower down payment, get a more attractive interest rate and save on private mortgage insurance.
Is a 600 credit score good enough to buy a house? ›
Yes, you can buy a house with a 600 credit score — but it would be less challenging if your score were higher. A 600 score will not be high enough to qualify for a conventional home loan, so look into FHA loans, which have lower requirements: 500 with a 10 percent down payment, and 580 with a 3.5 percent down payment.
What credit score is needed to buy a $400,000 house? ›
Your credit score has less bearing on your ability to get a mortgage than you might think. The minimum FICO score for a conventional loan is 620. The best rate comes with a score of 740 or higher.
What credit score is needed to buy a $300K house? ›
What credit score is needed to buy a $300K house? The required credit score to buy a $300K house typically ranges from 580 to 720 or higher, depending on the type of loan. For an FHA loan, the minimum credit score is usually around 580.
What credit score is needed to buy a house with no money down? ›
A USDA loan is insured by the U.S. Department of Agriculture and is meant for low- to moderate-income home buyers. The USDA doesn't require a down payment and doesn't set a minimum credit score requirement, though most lenders will want borrowers to have at least a 640.
What credit score for an FHA loan? ›
FHA loans allow borrowers with a credit score of 580 or above to purchase a house with a down payment as low as 3.5% of the purchase price. Borrowers with credit scores between 500 and 579 need at least 10% down. Keep in mind, these are the minimums set by HUD, but lenders may have their own minimums.
How much house can I afford if I make $70,000 a year? ›
The home price you can afford depends on your specific financial situation—your down payment, existing debts, and mortgage rate all play a role. Most experts recommend spending 25% to 36% of your gross monthly income on housing. For a $70,000 salary, that's a mortgage payment between roughly $1,450 and $2,100.
What salary do you need for a $400000 house? ›
The annual salary needed to afford a $400,000 home is about $127,000. Over the past few years, prospective homeowners have chased a moving target: homeownership. The median sales price of houses sold in the U.S. stood at $417,700 in the fourth quarter of 2023—down from a peak of $479,500 in Q4 2022.
How much downpayment do I need for $400,000? ›
What's the Down Payment on a $400k House?
| Loan Type | Minimum Down Payment (%) | Minimum Down Payment ($) |
|---|
| Conventional 97/HomeOne Loan | 3% | $12,000 |
| HomeReady/Home Possible Loan | 3% | $12,000 |
| FHA Loan | 3.5% | $14,000 |
| Conventional Loan (5%) | 5% | $20,000 |
3 more rowsApr 27, 2024
To purchase a $300K house, you may need to make between $50,000 and $74,500 a year. This is a rule of thumb, and the specific annual salary will vary depending on your credit score, debt-to-income ratio, type of home loan, loan term, and mortgage rate. Homeownership costs like HOA fees can also impact affordability.
Can I afford a 300K house on a 60k salary? ›
An individual earning $60,000 a year may buy a home worth ranging from $180,000 to over $300,000. That's because your wage isn't the only factor that affects your house purchase budget. Your credit score, existing debts, mortgage rates, and a variety of other considerations must all be taken into account.
How much income do I need for a 300K mortgage? ›
With a 5% down payment and an interest rate of 7.158% (the average at the time of writing), you will want to earn at least $6,644 per month – $79,728 per year – to buy a $300,000 house. This is based on an estimated monthly mortgage payment of $2,392.
What is the FHA rate for a 620 credit score? ›
If your credit score is 610, your rate might be 4.875%. At 620, your rate could drop to 4.125%.
Can I get a mortgage with a 650 credit score? ›
A 650 is on the high end of the fair credit score category, which ranges from 580 to 669. A 650 credit score will help you qualify for most home loans, but you may end up with a higher interest rate.
How to get 800 credit score? ›
Making on-time payments to creditors, keeping your credit utilization low, having a long credit history, maintaining a good mix of credit types, and occasionally applying for new credit lines are the factors that can get you into the 800 credit score club.
How much can I borrow with a 580 credit score? ›
You can borrow anywhere from a few thousand dollars to $100,000+ with a 580 credit score. The exact amount of money you will get depends on other factors besides your credit score, such as your income, your employment status, the type of loan you get, and even the lender.
