What Credit Score Is Needed to Buy a House in 2025?

Jul 11

3 min read

Does My Credit Score Matter When Buying a Home?

Yes — your credit score matters. In fact, it's one of the top factors lenders consider when deciding if you're approved for a mortgage and what interest rate you’ll get.

But here’s the good news: you don’t need perfect credit to buy a home. There are programs for nearly every credit range — and knowing where you stand can help you plan your next move.

Let’s break down what credit score you need based on the loan type, and how to get approved even with less-than-perfect credit.

Minimum Credit Score Requirements by Loan Type

Loan Type	Minimum Credit Score	Details
FHA Loan	580 (with 3.5% down) 500 (with 10% down)	Great for first-time buyers and those with low credit
Conventional Loan	620+	Requires stronger credit and income documentation
VA Loan (for veterans)	No official minimum, but 580–620 is common	Backed by the VA, flexible and no down payment
USDA Loan	640+ recommended	For rural areas and income-eligible buyers
Non-QM Loan	600–660+	Flexible loans for self-employed, investors, and unique borrowers

✅ Pro Tip: Even with a 580 score, you may qualify for an FHA loan — but a higher score gives you better rates and fewer restrictions.

Why Credit Score Impacts Your Mortgage

Your credit score affects:

Whether you get approved
Your interest rate
How much home you can afford
Your down payment or mortgage insurance requirements

A higher score = lower rates and better terms.Even a 30-point difference could save you tens of thousands over the life of your loan.

What Lenders Look For (Beyond Just the Score)

Lenders also check your:

Credit history (late payments, collections, bankruptcies)
Debt-to-income ratio (DTI)
Length of credit history
Types of credit accounts

So don’t panic if your score is borderline — other strong areas (like steady income or large savings) can help offset it.

How to Improve Your Credit Score Before Buying

Pay down credit card balances
Avoid new credit inquiries
Dispute any errors on your credit report
Settle collections or negotiate removal
Keep accounts open to increase credit age

🕒 Start improving your credit at least 3–6 months before you plan to buy.

Real-Life Example

Let’s say:

You have a 580 credit score and $10K saved.
You apply for an FHA loan and get approved for a $250,000 home with 3.5% down.
With a higher credit score (say 680+), your monthly payment could drop by $150–$200/month just from a better rate.

That’s over $60,000 in savings over 30 years — just for improving your score.

Can I Buy a Home with Bad Credit?

Yes, it’s possible — but expect:

Higher interest rates
Larger down payments
Tighter underwriting

FHA loans and Non-QM loans are your best bet. You can also use co-signers, larger reserves, or gift funds to strengthen your application.

📍 Final Take: What’s a Good Credit Score to Buy a Home?

Credit Range	Rating	Buying Power
740+	Excellent	Best rates and terms
700–739	Good	Very favorable rates
660–699	Fair	Eligible for conventional loans
580–659	Poor to Fair	FHA or Non-QM options available
Below 580	Challenging	Still possible with strong compensating factors