Mortgage lenders weigh your credit score heavily when deciding whether to approve your application and what rate to offer you.
Your credit score is a three-digit number that can range from 300 to 850. It reflects your credit history and overall creditworthiness. The higher the number, the more likely you are to be approved.
There are multiple versions of your credit score, but mortgage lenders typically useFICO®Score 2, 4 or 5.
Below, we outline credit score requirements for common mortgage types, look some of the best lenders if you have bad credit and show you simple ways you can improve your score.
Credit score for a mortgage
- What credit score do you need to buy a house?
- How your credit score affects your interest rates
- Mortgage options for low credit scores
- How to improve your credit score
- FAQs
What credit score do you need to buy a house?
The score you need to secure a mortgage depends on what kind of loan it is.
Conventional loan
About 70% of all mortgages are conventional loans, making it the most common type of mortgage. A FICO score of 620 or better is typically required for a conventional loan and, if your score is760 or higher, you should qualify for the best interest rates.
FHA loans
FHA loans are insured by the Federal Housing Administration and typically require a credit score of 500 and a 10% down payment. If you have a score of 580 or better, however, you can put down just 3.5%.
VA loans
Insured by the U.S. Department of Veteran Affairs, VA loans are available to current and former service members and their spouses. While the VA doesn't set any credit score requirements, most lenders will want a 620.
USDA loans
A USDA loan is insured by the U.S. Department of Agriculture and is meant for low- to moderate-income borrowers buying a home in a designated rural or suburban area.
The USDA doesn't set a minimum credit score requirement, though most lenders will want borrowers to have at least a 620.
Jumbo loan
A jumbo loan exceeds the limits for mortgages set by the Federal Housing Finance Agency, which means they can't be insured by FHA or bought by Fannie Mae or Freddie Mac. Since that puts lenders at increased risk, they require a higher credit score — typically a 700.
How your credit score affects your interest rate
Mortgage lenders use your FICO credit score to decide whether to approve your loan and what interest rate to charge you. Generally speaking, the higher your credit score, the lower your rate will be.
A homebuyer with very good or excellent credit (780 to 850) taking out a 30-year, fixed-rate mortgage for $400,000 will receive a mortgage rate of 5.965% interest rate on average, according to FICO's Home Purchase Center calculator.
If the same borrower has a credit score between 700 and 759, their rate would go up to 6.187%.
That rate starts to rise precipitously as the score drops below 700, according to FICO: With a 640, you would pay 7% on average. With a 620, it would go up to 7.554%.
Mortgage options for bad credit
While a 620 FICO score is the benchmark for a conventional mortgage, there are options for borrowers who have a lower score or no credit score at all.
If you have bad credit
Carrington Mortgage Services
Annual Percentage Rate (APR)
Apply online for personalized rates
Types of loans
Conventional, FHA, VA, USDA, Prime Advantage, Flexible Advantage (non-qm)
Terms
Fixed-rate mortgages with terms of between 15 and 40 years; ARMS with introductory periods of 5, 7 and 10 years
Credit needed
620 for conventional, 500 for FHA and VA, 550 for USDA, 550 for Carrington Flexible Advantage
Minimum down payment
3%
Terms apply.
Carrington Mortgage Services specializes in working with borrowers with poor or fair credit. The Carrington Flexible Advantage loan is a non-qualified mortgage with a credit score requirement of 550, making it a good option if you've made late payments or had a bankruptcy in the past.
In addition, the California-based lender considers alternative credit sources, such as bank statements and paid bills.
If you don't have a credit score
Guild Mortgage
Annual Percentage Rate (APR)
Fixed-rate and adjustable-rate available, apply online for rates.
Types of loans
Conventional loans, construction loans, FHA loans, VA loans, USDA loans and Jumbo loans
Terms
15-year to 30-year
Credit needed
Some loans require a 620 credit score, some require a 540 credit score or no credit score at all.
Minimum down payment
0% if moving forward with a USDA loan; 0% if moving forward with an Arrive Home™ or Zero Down mortgage (a 3% to 5% down payment is financed through a second mortgage with these options) ; 1% on conventional loans for some qualifying borrowers
Guild Mortgage will consider applicants who don't have a FICO credit score by looking at non-traditional credit sources,such ason-time rent, medical or utility bill payments. In addition to conventional mortgages, Guild offers government-backed USDA, FHA and VA loans.
If you're applying for a VA loan
While most lenders look for a 620 FICO score for a VA loan, Rocket Mortgage accepts applicants with a 580. This online lender is the nation's largest issuer of home loans and routinely tops JD Power's mortgage surveys.
Rocket Mortgage
Annual Percentage Rate (APR)
Apply online for personalized rates
Types of loans
Conventional loans, FHA loans, VA loans and Jumbo loans
Terms
8 – 29 years, including 15-year and 30-year terms
Credit needed
Typically requires a 620 credit score but will consider applicants with a 580 credit score as long as other eligibility criteria are met
Minimum down payment
3.5% if moving forward with an FHA loan
Already have a mortgage through Rocket Mortgage or looking to start one? Check out the Rocket Visa Signature Card to learn how you can earn rewards
If you're applying for a USDA loan
Flagstar
Annual Percentage Rate (APR)
Fixed-rate and adjustable-rate available, apply online for rates.
Types of loans
Conventional, FHA loans, VA loans, USDA loans, Jumbo loans, HELOC, refinancing loans, renovation loans, HomeReady, Home Possible, ReFi Now, Refi Possible, Community Reinvestment Act loans
Terms
15-year and 30-year fixed-rate; 5-year, 7-year, 10-year introductory period for adjustable-rate loans
Credit needed
620 for conventional, 600 for Destination Home Mortgage
Minimum down payment
3% for conventional loans, 0% with Destination Home Mortgage
Flagstar will approve USDA loans for applicants with scores as low as 580, compared to the 620 most lenders want to see. With the Flagstar Gift Program, eligible first-time homebuyers can receive 3% of their home's purchase price to put toward their down payment or closing costs.
How to improve your credit score
Your credit score reflects your history of paying off debt. Here are some ways to improve it.
- Make on-time payments on credit cards, loans and other debts.
- Pay the full balance due on your credit card each month
- Keep your credit utilization rate under 30%
- Increase the credit limit on existing credit cards
- Don't open new lines of credit
FAQs
What credit score do you need to get a mortgage?
Most lenders want to see at least a 620 FICO score for a conventional mortgage.
What kind of mortgages can borrowers with bad credit get?
Look for lenders that offer FHA loans. Many lenders will accept a 500 credit score if you can make a down payment of 10%. If you have at least a 580, you can typically put down just 3.5%.
What credit score do I need to get the best mortgage rate?
To get the best rate, you'll usually need a FICO credit score of at least 760.
Subscribe to the CNBC Select Newsletter!
Money matters —so make the most of it. Get expert tips, strategies, news and everything else you need to maximize your money, right to your inbox.Sign up here.
Why trust CNBC Select?
At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every mortgage article is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of mortgage products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics.
Catch up on CNBC Select's in-depth coverage ofcredit cards,bankingandmoney, and follow us onTikTok,Facebook,InstagramandTwitterto stay up to date.
Read more
Best mortgage lenders if you have bad credit
How to improve your credit before applying for a mortgage
Which of these mortgage types is right for you?
How to understand your credit score (and check it for free)
Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
