Generally speaking, conventional home loans will require a credit score of 620 or higher according to Fannie Mae’s qualified lending requirements, but lenders will set their own minimum credit requirements.
|What Credit Score Do You Need to Buy a House?
||Minimum Credit Score
||No minimum (whole loan profile reviewed)
Regardless of whether you’re buying for the first time or refinancing an existing mortgage, the minimum credit score required for a home loan will depend on the type of mortgage you’re applying for and your lender.
How do I get a home with bad credit?
While conventional home loans have higher credit thresholds, homeowners may still be able to be approved for mortgage financing through government-backed mortgage programs, like the ones sponsored by the VA, FHA and USDA.
These programs receive explicit backing from the Federal government which reduces their risk to the lenders that provide them. As a result, prospective borrowers are able to be approved for home loans with credit scores as low as 540 in the case of an FHA-backed hone loan.
If you’re a military veteran or servicemember who qualifies for a VA loan, you may not even be required to meet any credit score standard, but will instead be evaluated based on your entire financial profile.
Keep in mind that even if you’re approved for a home loan with a poor credit score, you will likely be penalized with a higher interest rate or more restrictive loan terms. It may be more cost effective to defer taking out a home loan until you’ve had a chance to improve your credit score.
How can I raise my credit score?
Prospective borrowers can improve their credit profiles by reducing their outstanding debts, paying off their credit cards and staying up to date on their monthly payments. It’s also helpful to avoid making any new credit applications or taking out any new debt in the interim.
Credit repair is a long-term commitment which may take months or even years to remedy, depending on your financial profile. However, the benefits of a high credit score cannot be understated, as it can mean tens of thousands of dollars in savings over the life of a home loan and even the difference between rejection and approval.
You can check out LendingTree’s collection of guides on how you can improve your credit. For those who need hands on guidance, LendingTree also features its own credit repair and consulting services through Ovation.