What is the Minimum Credit Score Required for a Mortgage?: How Your FICO Stacks Up

What is the Minimum Credit Score Required for a Mortgage?: How Your FICO Stacks Up

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The lowest credit score required for any mortgage loan product is 500, which applies specifically to Federal Housing Administration (FHA) loans with a 10% down payment. For the more common conventional mortgage, the minimum credit score is 620, according to Fannie Mae's guidelines. For certain federal programs, a borrower can qualify for a mortgage without having any credit score on file.

What is the Minimum Credit Score for a Mortgage?

The minimum credit score you'll need to apply for a mortgage can differ based on what program or loan type you choose, but the lowest figure we found was a score of 500 required for FHA loans involving a down payment of 10% or more. For the most common type of home loan—the conventional mortgage—minimums range from 620 to 680 depending on the lender.

Minimum Credit Scores for Different Mortgage Types

FHA loan with 10% down payment
FHA loan with 3.5% down payment
VA loan
USDA loan
Conventional (Fannie Mae guidelines)
Conventional (national average)

Lenders view credit scores in ranges rather than exact numbers. Even when a minimum credit score is specified by a federal agency, banks with stricter lending requirements may require a higher credit score. For borrowers with lower credit scores, mortgages guaranteed by the federal government through either the FHA, Department of Veterans Affairs (VA) or United States Department of Agriculture (USDA) can be good options.

U.S. government agencies may partially or fully guarantee a mortgage before a bank is willing to underwrite it, which is why the credit standards for FHA, VA, and USDA loans are typically lower than the standards for average conventional mortgages. While you may qualify according to the scores listed above, the loan is made through a private lending institution and acceptance standards may vary.

Minimum Credit Score for Conventional Mortgages

The typical minimum credit score for conventional mortgages is 620, based on guidelines established by Fannie Mae. Many loan providers raise capital after making loans by turning around and selling those mortgages to government agencies, such as Freddie Mac and Fannie Mae. Fannie Mae will not purchase home loans issued to borrowers with credit scores lower than 620, so most banks are unwilling to underwrite mortgages at those levels.

The exceptions to that rule are when the loan is guaranteed by the government in some other way—e.g. VA, USDA, and FHA loans—or when the lender is a small bank or credit union that will not resell them to the agencies. The requirements for a conventional mortgage vary from lender to lender, and may exceed the requirements imposed by Fannie Mae and Freddie Mac.

Conventional mortgages are issued by private banks or credit unions, and don't include a government guarantee. They typically offer the most competitive rates to borrowers with good credit, but may have stricter requirements than loans insured by a government agency. Applicants with credit scores greater than 720 will qualify for the most competitive rates. Some of the largest lenders for conventional mortgages include Citibank, J.P. Morgan Chase and Bank of America.

Minimum Credit Score for FHA Loans

The minimum credit score for mortgages obtained through the FHA is 500, if the buyer is willing to provide a 10% down payment on the property. To take advantage of the FHA’s lower down payment of 3.5%, the borrower will need a credit score of 580 or higher. Borrowers with credit scores lower than 500 will not qualify for an FHA loan.

The FHA insures mortgages to make homes affordable to individuals with low income or below-average credit scores. The guarantee provided by the FHA effectively subsidizes the rates provided by private banks. For more information, see our guide on FHA loans and how to qualify for them. AnnieMac, PennyMac and SunTrust all underwrite FHA mortgages.

Minimum Credit Score for VA Loans

The VA doesn't list a minimum credit score, but individuals with credit scores beneath 620 may have difficulty being approved. However, applicants with no credit score can still apply for mortgages through the VA because applications are evaluated on a case by-case basis; a poor credit score by itself will not lead to rejection. VA loans are only available to qualifying veterans of the U.S. armed forces.

The VA insures mortgages to help both active-duty and former military personnel qualify for affordable housing. Benefits offered by VA loans include competitive interest rates and no down payment options. However, taking advantage of these benefits requires you to qualify for VA loan eligibility. Some providers who specialize in VA loans include J.G. Wentworth, Pentagon Federal Credit Union and Freedom Mortgage.

Minimum Credit Score for USDA Loans

The minimum required credit score for mortgages acquired through the USDA is 640. But applicants with lower credit scores or insufficient credit history are evaluated on the basis of landlord verification, housing payments or other measures of nontraditional credit. Applicants for USDA loans must reside within qualifying rural and suburban areas.

The USDA home loan program provides low-income residents in rural communities with access to affordable financing. The USDA both insures and underwrites loans through its Guaranteed Loan and Direct Loan programs. The USDA offers loans with no down payments for qualifying applicants.

How to Improve Your Credit Score

On average, individuals with low credit scores have greater difficulty qualifying for loans, face higher interest rates, and are required to make higher down payments. A poor credit score may cost an individual thousands of dollars over the life of a mortgage. For some, it may be worthwhile to delay new loan applications in favor of rebuilding your credit.

A few dozen points can mean the difference between being approved or rejected for a mortgage. However, significantly improving your credit score takes time. We outline a few factors that will impact your credit score below.

On-Time Payments:Timely payments have the greatest effect on your credit score. Demonstrating a long history of consistent payments will go a long way to improving your credit. Conversely, missed payments will have a negative impact on your score.

Credit Utilization: The amount of credit you use will have the second greatest impact on your credit score. Using less than 30% of your allotted credit limit is a good rule of thumb and should raise your score over time, assuming you pay down any balance you accumulate. Using a large percentage of your credit will negatively impact your score.

Time: The age of your credit accounts will also influence your credit score. Your credit score increases as your credit accounts age and the longer you make payments on-time.

Credit Inquiries: Hard inquiries are made when you apply for a new credit card, loan or property lease. Numerous hard credit inquiries can have a negative impact on your credit score if they involve multiple types of credit over a short period of time. Try to minimize the number of credit inquiries, as hard inquiries can stay on your record for up to two years.

Types of Credit: The amount of credit you’re allotted will impact your credit score. Lenders generally prefer borrowers with a variety of accounts—e.g. auto loans, student loans, credit cards—and a demonstrated history of responsibly paying down each account.

How to Get a Mortgage With No Credit

Many conventional mortgage providers evaluate applications through an automated underwriting system which accepts or denies applications based on a number of requirements, which include your credit score, loan-to-value ratio and loan size. In comparison, a manual underwriting system is more labor intensive and accepts nontraditional forms of credit history.

Manual underwriting is prevalent for government-sponsored loans such as the FHA, VA and USDA, as well as certain smaller banks or online lenders. First-time borrowers or consumers seeking a mortgage without a credit record may still qualify for a mortgage through these programs. SoFi and Wells Fargo offer alternative lending standards or special programs for first-time home buyers.

Some of the qualifications that lenders will review in lieu of an established credit history include:

  • Rental & Utility Payments: Housing payments are a good indicator of a borrower’s inclination to make timely mortgage payments. These payments can even be factored into the calculation of the borrower’s credit score if the landlord opts in.
  • Insurance & Medical Payments: These build your credibility as a responsible payer of bills, and substitute for loan payments as regularly occurring expenses that reflect your payment record.
  • Cash Receipts: If a mortgage applicant doesn't have a credit history because they prefer to use cash for transactions, then cash receipts can establish a written record of the borrower’s payment history.
Kenny Zhu

Kenny is a Banking and Mortgage Research Analyst for ValuePenguin and has worked in the financial industry since 2013. Previously, Kenny was a Senior Investment Analyst at PFM Asset Management LLC. He holds a Bachelors of Science from Carnegie Mellon University, where he majored in International Relations & Politics. He is a CFA® charterholder.

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

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