What Credit Score Do You Need To Buy A House? (2024)

Your credit score is just one element that goes into a lender’s approval of your mortgage. Here are some other personal factors that lenders consider when qualifying you for a mortgage.

1. Debt-To-Income Ratio (DTI)

Your debt-to-income ratio (DTI) is the percentage of your gross monthly income that goes toward paying off debt. Having less debt in relation to your income makes you less risky to lenders, which means you’re able to safely borrow more on your mortgage.

To find your DTI, divide the amount of recurring debt (including credit cards, student loans and car payments) you have by your monthly income. Here’s an example:

If your debt is $1,000 per month and your monthly income is $3,000, your DTI is $1,000 / $3,000 = 0.33, or 33%.

It’s advantageous to have a DTI of 50% or lower. The lower your DTI, the better chance you have at being offered a lower interest rate.

2. Loan-To-Value Ratio (LTV)

The loan-to-value ratio (LTV) is another factor used to determine how you qualify for a home loan. Your LTV is the loan amount divided by the home’s purchase price.

Here’s an example. Let’s say you buy a home for $150,000, put $30,000 down and take out a mortgage loan for $120,000. Your LTV would be 80%. As you pay off more of your loan, your LTV decreases. A higher LTV is riskier for your lender because it means your loan covers a majority of the home’s cost.

LTV decreases when your down payment increases. Considering the example above, if you take out a $110,000 loan and put $40,000 down ($10,000 more than before), your LTV is now 0.73, or 73%.

Different lenders accept different LTV ranges, but it’s best if your ratio is 80% or lower. If your LTV is greater than 80%, you may be required to pay a form of mortgage insurance. Keep in mind that this varies by loan type. Some loans, like VA loans, may allow you to finance the full purchase price of the house without having to pay mortgage insurance.

3. Income And Assets

Your lender wants to be sure that you maintain a steady income and consistent employment. Lenders often ask borrowers for documents that validate their income, assets and work history. These documents may include recent bank statements, pay stubs and W-2s. The steadiness of your income could affect the interest rate you’re offered.

What Credit Score Do You Need To Buy A House? (2024)

FAQs

What Credit Score Do You Need To Buy A House? ›

The minimum credit score needed for most mortgages is typically around 620. However, government-backed mortgages like Federal Housing Administration (FHA) loans typically have lower credit requirements than conventional fixed-rate loans and adjustable-rate mortgages (ARMs).

What is a decent credit score to buy a house? ›

What credit score do you need to get a mortgage? Mortgage lenders typically want to see a score of 620 or better before approving a conventional mortgage. There are government-insured mortgages if your score is lower, and if your score is 760 or higher you'll qualify for the best interest rates.

Can you buy a house with a 600 credit score? ›

Yes, you can buy a house with a 600 credit score — but it would be less challenging if your score were higher. A 600 score will not be high enough to qualify for a conventional home loan, so look into FHA loans, which have lower requirements: 500 with a 10 percent down payment, and 580 with a 3.5 percent down payment.

What credit score do I need to buy a $250000 house? ›

To qualify for a conventional loan, you'll need a credit score of at least 620, though some lenders may choose to approve conventional mortgage applications only for borrowers with credit scores of 680 and up.

Can you get a mortgage with a credit score of 550? ›

While it's true that a lower credit score of 550 or less can decrease the choice of lenders who are willing to accept you, it doesn't mean that getting a mortgage is completely out of the question.

What credit score is needed for a 300K house? ›

What credit score is needed to buy a $300K house? The required credit score to buy a $300K house typically ranges from 580 to 720 or higher, depending on the type of loan. For an FHA loan, the minimum credit score is usually around 580.

Can I buy a house with a 580 credit score? ›

You can get a mortgage with a credit score as low as 620, 580 or even 500, depending on the type of loan. Some mortgage lenders offer bad credit loans with more flexible qualifying requirements but higher costs. Others offer free credit counseling to help you improve your score before applying for a loan.

Is it true that after 7 years your credit is clear? ›

Highlights: Most negative information generally stays on credit reports for 7 years. Bankruptcy stays on your Equifax credit report for 7 to 10 years, depending on the bankruptcy type. Closed accounts paid as agreed stay on your Equifax credit report for up to 10 years.

How long does it take to improve your credit score by 100 points? ›

In fact, some consumers may even see their credit scores rise as much as 100 points in 30 days. Steps you can take to raise your credit score quickly include: Lower your credit utilization rate. Ask for late payment forgiveness.

How big of a loan can I get with a 600 credit score? ›

With FICO, fair or good credit scores fall within the ranges of 580 to 739, and with VantageScore, fair or good ranges between 601 to 780. Many personal loan lenders offer amounts starting around $3,000 to $5,000, but with Upgrade, you can apply for as little as $1,000 (and as much as $50,000).

What salary do you need for $250000 mortgage? ›

If a borrower has no other debt obligations, a conforming loan for a $250,000 property with 10% down in a 7% rate environment would require a gross monthly income of approximately $3,870, factoring in a 50% debt ratio.

How much income do I need for a 250K mortgage? ›

If you follow the 2.5 times your income rule, you divide the cost of the home by 2.5 to determine how much money you need to earn annually to afford it. Based on this rule, you would need to earn $100,000 per year to comfortably purchase a $250,000 home.

What is the minimum down payment on a $250000 house? ›

Putting down the standard 20% can help you avoid paying mortgage insurance and interest and could save you thousands of dollars. So you can expect to pay between $7,500 an $50,000 as a down payment on a $250,000 purchase. Keep in mind, besides the down payment amount, you will also have to factor in closing costs.

How can I raise my credit score 200 points in 30 days? ›

How to Raise Your Credit Score by 200 Points
  1. Get More Credit Accounts.
  2. Pay Down High Credit Card Balances.
  3. Always Make On-Time Payments.
  4. Keep the Accounts that You Already Have.
  5. Dispute Incorrect Items on Your Credit Report.

How can I raise my credit score quickly? ›

15 steps to improve your credit scores
  1. Dispute items on your credit report. ...
  2. Make all payments on time. ...
  3. Avoid unnecessary credit inquiries. ...
  4. Apply for a new credit card. ...
  5. Increase your credit card limit. ...
  6. Pay down your credit card balances. ...
  7. Consolidate credit card debt with a term loan. ...
  8. Become an authorized user.
Jan 18, 2024

How bad does a repo hurt your credit? ›

Having a repossession on your credit report can decrease your credit score by approximately 100 points or more. Keep in mind that someone with a FICO credit score of 669 or below is considered to be a subprime borrower, while an exceptional credit score is above 800.

What credit score is needed to buy a $400,000 house? ›

Your credit score has less bearing on your ability to get a mortgage than you might think. The minimum FICO score for a conventional loan is 620. The best rate comes with a score of 740 or higher.

Is a 750 credit score good for a house? ›

If your credit score is 750, you're in a slightly better position than the typical first-time homebuyer: 2023 data from Fannie Mae shows that the average credit score for a first-time homebuyer is 746.

Can I buy a house with a 700 credit score? ›

Yes. Assuming the rest of your finances are solid, a credit score of 700 should qualify you for all major loan programs: conventional, FHA, VA and USDA loans all have lower minimum requirements, and even jumbo loans require a 700 score at minimum.

What credit score is needed to buy a $500,000 house? ›

Expect most mortgage lenders to want minimum credit scores of 620 or even 640.

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