The minimum credit score you need for a mortgage depends on the type of loan you get.
But it also depends on the lender you’re using.
This article will find the lowest score you need for each program and how to find lenders offering loans to buyers with the minimum scores.
RATE SEARCH: Get approved for a home loan
Minimum Credit Score by Loan Type
Down Payment Requirement by Loan Type
3.5% with 580 score (10% down with 500-579 score)
No down payment
No down payment
5% - 20%
Conventional 97 Loan
Home Possible Loan
500-579 credit score
10% down payment
580+ credit score
3.5% down payment
With the lowest minimum credit requirement of any mortgage, FHA loans are hands down the best mortgage type for borrowers with bad credit.
The Federal Housing Administration has set the minimum credit guidelines needed for them to ensure a mortgage.
If your credit score is below 580, it’s recommended that you take some time to repair your credit before applying. Borrowers with a 580 credit score could qualify with just 3.5% down.
2020 FHA Loan Requirements
• 580 credit score with 3.5% down
• 500-579 score with 10% down
• Maximum 50% debt-to-income ratio
• Two years of stable employment and income history
• For primary residence only
• 24 month waiting period after a foreclosure or bankruptcy
• 1% of student loan debt added to DTI ratio
The Veterans Administration does not do not have a minimum credit score requirement to guarantee a loan.
Lenders set their own credit guidelines for VA loans.
You will find that most mortgage companies will require a 640 or better score. However, some lenders can work with lower scores, even below 580, in some cases.
VA Eligibility Requirements
• Active-duty service member
• Current or former activated National Guard or Reserves
• Surviving spouse
• Discharged member of the National Guard or Reserves and never activated
• Discharged member of the National Guard and were never activated
USDA Loans are for people who live in rural areas that are ineligible USDA zones.
The US Department of Agriculture does not require a down payment to qualify.
Another great benefit to USDA loans is that mortgage insurance premiums are $100 less a month on average compared to FHA MIP.
USDA Loan Benefits
• 100% financing - No down payment needed
• Flexible credit and qualifying requirements
• 620 credit score required
• Up to 50% debt-to-income ratio
• No cash reserves required
• Low interest rates
• The seller can pay 6% of closing costs
• Fixed-rate and adjustable-rate loan terms
• No pre-payment penalty
• Finance closing costs and repairs into the loan
203k loans are great for people who want to buy a home that needs repairs.
A standard 203k loan will allow you to purchase a home and get cash to make major repairs, such as foundation or plumbing system repairs.
A streamline 203k loan is for homes that need minor repairs, such as cosmetic upgrades.
2020 FHA 203k Loan Requirements
• Minimum 620 credit score
• 24 month waiting period after a bankruptcy or foreclosure
• Maximum 43%-50% debt-to-income ratio
• For primary residence only
The federal government does not guarantee conventional loans; private banks and lenders offer them.
Thus, the lender is taking on more risk, meaning the requirements to qualify for a conventional loan are higher than FHA loans.
The minimum score you need for a conventional loan is 620; The downpayment is between 5% and 20% depending on the loan’s size and your credit score.
Conventional loans do have programs available for first-time homebuyers requiring just 3% down.
First-time buyers have lower FICO scores than the typical home buyer on average, making it more difficult for the average first-time homebuyer to qualify for a loan. FHA loans a great option for first-time homebuyers.
FHA loans also require a very low down payment of just 3.5% of the purchase price. They even allow up to 100% of the purchase price to be a gift from a friend or relative.
First-time Home Buyer Programs and Grants
The U.S. Department of Urban Housing (HUD) has many different first-time homebuyer grants and downpayment assistance programs.
Search for available programs in your state on the HUD website.
You can also check your local county Government website to check if they have any programs available for home buyers.
Tips to Improve your credit score before you apply for a mortgage
Pay off your credit card balances
The credit utilization ratio is the balance of your credit card compared to the credit limit.
If you have a credit card with a $1,000 credit limit and the balance is $500, you have a credit utilization ratio of 50%.
Try to pay down your credit card balances below 15%; this will ensure your credit scores are the highest they can be before you apply with a mortgage lender.
Become an authorized user
Banks allow you to add someone to your account to be an authorized user.
If you are added as one on an account with good payment history, the entire account will appear on your credit report, usually within 45 days.
FICO does count authorized user accounts when factoring your credit score.
This is a simple way to add 20-30 points to your credit score quickly.
Finding Lenders That Help Low Credit Score Home Buyers
Since lenders do not have to go by the FHA minimum credit score requirements, not all lenders will accept less than a 620 score for FHA Loans.
Yet, there are mortgage lenders who will work with applicants with credit scores of 580.
Finding the right lender can take time, so getting help can make it easier for you to move quickly into homeownership.
RATE SEARCH: Get approved for a mortgage and check rates