What Credit Score Is Needed for a Home Loan?

Your credit score is one of the most important factors when it comes to getting approved for a home loan. Here’s what you need to know.

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Minimum Credit Score Needed

In order to qualify for a home loan, you will need a minimum credit score of 580 on the FICO® scale. This represents a slight advantage over the conventional loan, which typically requires a minimum credit score of 620. If your score falls below this mark, you may still be eligible for an FEDLOAN Servicing loan with a 10% down payment.

Types of Loans and Their Minimum Credit Score Requirements

You’ve finally saved up enough for a down payment on a home, and now you’re ready to take the plunge into homeownership. But before you start searching for your dream home, you need to figure out what kind of loan you can qualify for and what kind of down payment you can afford. The first step is to understand the different types of loans available and their minimum credit score requirements.

FHA Loans

The Federal Housing Administration (FHA) backs loans to certain higher-risk borrowers, which can help people with limited incomes and credit scores qualify for a mortgage. FHA loans typically have lower interest rates than conventional mortgages, but things like mortgage insurance premiums (MIP) can make them more expensive. You’ll need to have at least 3.5% for a down payment and your credit score must be 580 or higher.

VA Loans

VA loans are available to qualified veterans, active-duty service members and their families. These loans are backed by the U.S. Department of Veterans Affairs and offer a number of benefits, including no down payment, no private mortgage insurance and more lenient credit score requirements than most other loan types.

The minimum credit score for a VA loan is 580. However, lenders may require a higher score in some cases. If you have a lower credit score, you may still be able to get a VA loan, but you may need to provide a larger down payment or find another lender who is willing to work with you.

Conventional Loans

Conventional loans are debt instruments that are not insured or guaranteed by the federal government. They are typically issued by private banks, credit unions, and mortgage companies. The main advantage of a conventional loan is that they usually have lower interest rates than other types of loans. There are several different types of conventional loans, and each has different minimum credit score requirements:

-Conventional Loan for Investment Property: 620
-Conventional Loan for Second Home: 680
-Conventional Loan for Primary Residence: 720

An important thing to note is that you may need a higher credit score to qualify for a conventional loan than another type of loan. This is because conventional loans typically have stricter lending standards than other types of loans.

How to Improve Your Credit Score

Your credit score is one of the most important factors in determining whether or not you will be approved for a home loan. If your credit score is too low, you may not be able to get a loan at all. There are a few things you can do to improve your credit score, such as paying your bills on time, maintaining a good credit history, and using a credit monitoring service.

Pay Your Bills on Time

One of the most important things you can do to improve your credit score is to pay your bills on time. This includes your mortgage, car loan, student loans, credit cards and any other kind of loan or credit account you have. Even if you can only make the minimum payment, be sure to send in your payment by the due date.

If you have trouble remembering to pay your bills on time, set up automatic payments with your bank or creditors. This way, you’ll never have to worry about missing a payment again. You can also set up email or text reminders to help you keep track of when your payments are due.

Paying your bills on time is one of the best ways to improve your credit score and get on the path to financial success.

Keep Your Credit Utilization Low

Credit utilization is one of the most important factors in your credit score, accounting for 30% of your score. Credit utilization is simply the ratio of your credit card balances to your credit limits—the lower the better.

For example, if you have a $1,000 credit limit and you carry a balance of $500, your credit utilization ratio would be 50%. A lower credit utilization ratio shows that you’re using a smaller portion of your available credit and implies that you’re a lower-risk borrower.

Ideally, you should keep your credit utilization below 30%, but the lower the better. If you can get it below 10%, that’s even better. You can improve your credit utilization by paying down your credit card balances and/or asking for higher credit limits from your creditors.

Avoid Applying for New Credit

One of the things that can hurt your credit score is applying for new credit. Whenever you apply for a new credit card or loan, the lender will do a hard inquiry on your credit report. Hard inquiries can ding your score, especially if you have several of them in a short period of time.

If you’re planning to apply for a mortgage, try to avoid applying for any new credit in the months leading up to your loan application. Every hard inquiry can shave a few points off your score, so it’s best to minimize them if you can.


It’s not impossible to get a home loan with bad credit, but you will likely need to consider alternatives to conventional loans, such as FHA loans. Keep in mind that it’s also important to focus on improving your credit score so that you can qualify for more favorable loan terms in the future.

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