What credit score is needed to buy a house? The answer is: it varies. Here are the minimum credit scores needed for different types of mortgages and why it matters.
Your credit score is the first thing a mortgage lender will check when seeing if you qualify for a loan. While there are many factors involved in qualifying for a loan, your credit score is the most important because it impacts not only your ability to qualify, but what rate you qualify for. The minimum credit score you need to purchase a home will depend on the type of loan program.
General minimum credit scores by mortgage type:
FHA Loan – 580+ credit score
VA Loan – 620+ credit score
USDA Loan – 640+ credit score
Conventional Loan – 620+ credit score
Compensating factors for poor credit are factors that reduce the lenders risk, allowing them to approve borrowers with low credit scores. Some compensating factors are low loan-to-value ratio (in other words a higher down payment), large amount of money in savings, high income, low debt-to-income ratio, and long employment history with current employer.
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