What credit score do you need to buy a house?

Want to buy a home? Make sure your credit score is in tip-top shape first. (iStock)

For many people, buying a home is the most expensive investment they’ll ever make. Thus, it's important homebuyers know the credit score needed to buy a house, the loan type they desire, current mortgage rates, and any loan limits. A purchase that size takes preparation and going through a checklist can save money and time.

Continue Reading Below

Start by understanding what happens to your credit score. Most mortgage lenders have credit requirements. Specifically, they check your credit score to determine if you qualify for a home loan and your loan amount. Your credit score — whether you have poor credit or excellent credit — can also affect your interest rate (which, in turn, affects your monthly payments).

Before applying for a home loan, make sure you compare mortgage rates. Credible can introduce you to multiple mortgage lenders and provide you with personalized rates within just minutes (plus, and it doesn't impact your credit!).

If you're not pleased with the mortgage rates you're given, check your credit and make any changes necessary to increase your credit score. After all, credit scores change over time. There's always room for improving credit.

What's the average credit score needed to buy a house?

The score required to qualify for mortgage loans varies by loan type, location, and lender — but some scoring models will help you estimate the minimum score you need to get a loan.

You can also use Credible's free tool to see what kind of mortgage you can afford as you shop for homes.

HOW MUCH MONEY DO YOU NEED TO BUY A HOUSE?

To qualify for a Federal Housing Administration (FHA) home loan, here are the credit score requirements needed:

  • Minimum credit score: 500
  • For a down payment of at least 10%: Between 500 and 579
  • For a down payment of 3.5% or less: Above 580

Here are some more credit score requirements by loan type:

  • Jumbo loan (a mortgage for an amount that exceeds conforming loan limits): At least 680
  • Private loan (not FHA): 650 or higher

If your credit score is within the required range, then you can get started on the mortgage application process ASAP. Credible can walk you through the home buying process — use their free tools to browse different types of mortgage loans and see how much home you can afford. You can get pre-approved for a home line within three minutes.

If you already have a mortgage loan, then you can still use Credible to your advantage. Thanks to today's low interest rates, now is a great time to consider refinancing your mortgage. See current mortgage refinance rates from some of the country's top mortgage lenders. Get started today.

3 REASONS TO REFINANCE YOUR MORTGAGE IMMEDIATELY 

What affects your credit score?

There are several common credit information factors that can impact your credit score, including:

  1. Credit age
  2. Credit utilization
  3. Credit history
  4. Mix of credit
  5. Amount of debt
  6. Length of credit history
  7. New credit (and inquiries)
  8. Payment history (i.e. paying your bills on time)

Your payment history and credit utilization make up most of your score, so these two areas will have the most considerable impact in helping or hurting your credit. To secure the best rates, aim for a credit score of 680 or higher, no matter what type of loan you seek (a personal loan, home loan, auto loan, or beyond).

Good news: Checking mortgage rates via Credible won't affect your credit score. With just a few simple steps, you can secure your dream home. Here's what you need to do to complete the mortgage process online.

HOW NEW FICO SCORES AFFECT YOUR CREDIT

Is it possible to buy a house with bad credit?

You can purchase a home with poor credit, though your options will be limited and you may have to pay a higher interest rate. According to a report from the FHFA, only 19 percent of borrowers in 2016 had a credit score below 620. While it is possible to get a home loan with a lower score, it may be difficult. If your score is lower than 500, you won’t qualify for a home loan at all.

4 WAYS TO INCREASE YOUR CHANGES OF GETTING A MORTGAGE

What to do if you have a bad credit score

If you have a bad credit score, and you’re still interested in purchasing a home, there are a few things you can do.

  1. Save for a higher down payment
  2. Apply for an FHA loan
  3. Takes steps to increase your credit score

1. Save for a higher down payment

Show lenders you’re serious about your purchase by providing a larger down payment. If you have poor credit, presenting a down payment of 20 percent or more can help shift the odds of approval in your favor.

2. Apply for an FHA loan

If your score is below 650, an FHA loan could be your best option. Borrowers with scores in the low 500s can qualify for a loan, though you will be required to provide a down payment of at least 10 percent of the total loan.

3. Increase your credit score

If you want to avoid higher interest rates and higher monthly payments, take time to improve your credit score by paying off debt and paying bills on time every month.

Once your credit card is in tiptop shape, you can get started on the mortgage process. In the meantime, it's never too early to start doing your research. Learn about mortgage rates and what is needed to obtain a home loan today.

WHEN IS THE BEST TIME OF YEAR TO BUY A HOUSE?

How fast can you raise your credit score?

Raising your credit score depends on the type of negative marks you have and the actions you take right now. For example, missed payments can affect your credit score for up to 18 months, whereas closing an old account affects your score for about three months.

Additionally, your lenders may only submit information to credit scoring companies once per month. Aim to check your score about once a month if you’re improving credit habits and seeking score changes. Plan for at least three to six months before you check your credit score for significant changes.

If you’re trying to improve your credit score reduce your debt-to-income ratio, make all your payments on time, earn more money, don’t close any accounts, and avoid applying for new credit cards or credit accounts for a few several months.

THE FASTEST WAY TO INCREASE YOUR CREDIT SCORE