What Credit Score Do You Need to Buy a Home?
What Credit Score Do You Need to Buy a Home?
The floor is 580. The sweet spot is 640-700. And the number that most people don't think about: your credit score doesn't just determine whether you qualify. It determines what you pay every single month for the next 30 years.
Let me break this down so it actually makes sense.
Minimum Scores by Loan Type
FHA loan: 580 minimum for 3.5% down. Between 500-579, you'd need 10% down. Below 500, most lenders won't approve you.
Conventional loan: 620 is the typical floor. These loans follow Fannie Mae and Freddie Mac guidelines. You can get approved at 620, but your rate will reflect it.
VA loan: No official VA minimum, but most lenders want 580-620. If you've served, this is the best product available. Use it.
USDA loan: 640 minimum for the guaranteed program.
Down payment assistance programs: most state and local programs require 640 minimum. This is a critical threshold. You might qualify for an FHA loan at 620 and still miss the assistance program because of that 20-point gap.
The real story: Even though these are loan program minimums, most lenders will have ‘overlays’ on their guidelines, meaning they have stricter guidelines than the minimum required. So even if you have a 580 credit score, finding a lender that will underwrite and fund a loan might be challenging. And if you do find one, it’ll be expensive.
What Your Score Is Costing You Every Month
This is the part people skip. Your credit score isn't just a pass/fail. It's a pricing mechanism.
On a $280,000 loan at today's rates, the difference between a 620 score and a 760 score is roughly $150-$200/month in interest. That’s a lot for something that you can change, and affects your buying power significantly. Your credit score has a real dollar amount attached to it. Treat it like one.
The Five Factors That Make Up Your Score
Payment history (35%): whether you pay on time, every time. The biggest lever.
Amounts owed (30%): how much of your available credit you're using. Called utilization.
Length of credit history (15%): how long your accounts have been open.
Credit mix (10%): having different types of accounts.
New credit (10%): recent hard inquiries from applying for new credit.
Payment history and utilization together make up 65% of your score. If you want to move the needle fast, those are the two places to focus.
How to Improve Your Score Before Buying
Pay everything on time. One 30-day late payment can drop your score 50-100 points. Set up autopay for the small minimum if that's what it takes.
Get your utilization under 30%. If you have a $5,000 card limit, keep the balance under $1,500. Under 10% is better. Paying off your credit card every month and not keeping a balance at all is best. Paying down balances before applying can have a fast effect.
Can’t pay it down but have a higher than 30% utilization and you’ve been a great customer? Call them and ask for a credit line increase. A $1,000 balance on a $2,000 limit is 50% utilization. If your credit card company agrees to a credit line increase to $4,000, you went from 50% to 25% overnight without paying it off. If they say they’ll need to do a hard credit pull before agreeing to this, think that through before agreeing. If you’re 6 or more months away from wanting to buy, it’s probably ok. If you’re less, then that credit pull may hurt more than help you.
Don't open new accounts in the months before you apply. Hard inquiries knock points off. New accounts lower your average account age.
Don't close old accounts you're not using. This reduces available credit and raises your utilization ratio. Counterintuitive, but closing cards hurts your score.
What If You're Not There Yet?
Get a specific plan instead of just waiting. Talk to a lender now, even if you're months away from being ready. A good lender will pull your credit, show you exactly what's affecting your score, and tell you the specific moves to get you where you need to be.
Ask about rapid rescoring. This is a process where targeted changes (like paying down a specific balance) are verified and your score is rerun within a few weeks. Buyers can move 20-40 points faster than they expect when they have a specific plan. If you’re on the edge of a higher credit score bracket, this might be worth it.
FAQ
Will checking my own credit hurt my score?
No! Checking your own credit is a soft inquiry with zero impact. Don't avoid looking at your own score out of fear. In fact, make sure you do this every year.
Where can I go to pull my full credit report?
Go to https://www.annualcreditreport.com/index.action and pull your report every year. It’s free, it’s authorized by federal law, and it’ll show every account you’ve ever had. Make sure there’s no inaccuracies on there. If there is, get ahead of it now. Reach out to the credit agencies to dispute it.
Does medical debt affect my mortgage qualification?
Medical debt is treated differently than other types and the rules have been evolving. Some newer scoring models weight it less heavily. Ask your lender specifically how they handle medical collections.
My score is 605. Should I wait to buy?
Maybe not as long as you think. At 605, you may be 15-35 points away from significantly better options. Have a conversation with a lender before you decide anything.
Not sure where your credit stands or what it would take to get you ready? Let's figure it out. 828.575.6067 or [email protected].
Laura Shinkle
Charlotte’s First-Time Homebuyer Specialist | Realtor®
Coldwell Banker Realty | Licensed in NC & SC
CREN | PSA | CLHMS Certified
📲 828.575.6067 | 📧 [email protected]
