Credit Score Needed to Buy a House in 2025: The Truth About What You Actually Need

Key Takeaways

• FHA loans start at 580 credit score with 3.5% down (500 with 10% down)
• VA loans can go as low as 500 with clean payment history in the past year
• Conventional loans typically need 620, but exceptions exist
• Your rate matters more than qualifying – higher scores save serious money
• Most buyers can improve their situation in 60-90 days with focused effort

What Credit Score Do You Really Need to Buy a House?

Here are the actual minimums by loan type:

FHA Loans: 580 credit score (3.5% down) or 500 (10% down)

VA Loans: No VA minimum, most lenders want 580 (some accept 500 with clean payment history)

Conventional Loans: 620 for most lenders

USDA Loans: 600 minimum, 640 for automatic approval

Jumbo Loans: 660+ for loans over $806,500 (limited to 70-80% LTV based on purpose), 700+ for up to 90% LTV

But here’s what nobody tells you. These are minimums. What you actually get approved for depends on your complete financial picture.

Why People Think They Need Higher Credit Scores

Here’s what happens all the time. People think they need “good credit” to buy a house, so they look up credit score ranges and see that 670-739 is “good.”

Then they assume they need to be in that range.

But that’s not how it works.

You need the minimum for your loan program, not some arbitrary “good” rating. A 580 FHA borrower can buy the same house as someone with a 740 score. They’ll pay more in interest, sure, but they can still buy.

Here’s the thing about waiting two years to get from 580 to 670 – you might get priced out of the market entirely.

FHA Loans: Your Best Option with Lower Credit

If your credit isn’t perfect, FHA loans are probably your best shot. You can qualify with a score as low as 580 and just 3.5% down. With a 500 score, you need 10% down.

I help first-time buyers with FHA loans all the time. The key is having everything else lined up.

A young buyer was referred to me who wanted to stop renting and buy his first home. His credit was under 600, but he had enough money to put 3.5% down a home. He was able to qualify for an FHA loan because his scores were still above 580. Instead of paying rent every month, he’s building equity and has a place of his own.

What You Need Beyond Credit Score:

• Debt-to-income ratio under 50% (ideally under 43%)
• Two years stable employment
• Down payment and closing cost funds
• Property must pass FHA appraisal

The Trade-offs:

You’ll pay mortgage insurance for the life of the loan if you put down less than 10%. That’s 1.75% upfront plus 0.40% to 0.85% annually.

But even with mortgage insurance, FHA loans often beat sitting on the sidelines paying rent.

VA Loans: The Best Deal for Veterans

If you’re a veteran, this is where things get really good. The VA doesn’t set a minimum credit score requirement. Most lenders want 580, but some will go as low as 500 with a clean payment history and no new derogatory accounts in the past twelve months.

VA Loan Benefits:

• No down payment required
• No mortgage insurance
• Typically 0.25% to 0.50% lower rates than conventional loans
• More forgiving debt-to-income ratios

A veteran I worked with for over six months was able to use his VA loan benefit with scores in the mid 500s because he was able to reestablish a clean twelve month payment history after moving to a new state. He was able to get his family out of their rental and buy a $500,000 home.

The VA loan is honestly the best mortgage program out there. If you’re eligible, use it.

Conventional Loans: The 620 Standard

Most conventional lenders want to see at least 620. Some might go as low as 600 with a larger down payment, but 620 is pretty much the standard.

Why 620?

It comes from how mortgages get sold. Lenders sell loans to government-sponsored enterprises like Fannie Mae and Freddie Mac, and they typically require 620 minimum scores in their loan pools.

Conventional Loan Benefits:

• Lower mortgage insurance costs than FHA
• 3% down payment options for first-time buyers
• Can remove mortgage insurance at 20% equity
• No upfront mortgage insurance premium

The rate difference between a 620 score and a 740 score? About 0.75% to 1.0%. On a $350,000 loan, that’s $200-300 more per month.

USDA Loans: Rural Property Options

USDA loans are for homes in qualifying rural areas. You can qualify with a 600 minimum score, though 640 or higher gets automatic approval through their system.

USDA Requirements:

• Property must be in an eligible rural area
• Income limits based on area median income
• Must be your primary residence

USDA loans offer 100% financing with competitive rates. If you’re looking outside city limits, they’re worth checking out.

How Your Credit Score Actually Affects Your Mortgage

Your credit score impacts three main things:

Interest Rate: Higher scores get lower rates. Someone with 760+ credit gets about 5.965% while 620 credit gets 7.554% on average.

Loan Approval: Below certain thresholds, you won’t qualify at all.

Down Payment Requirements: Some programs require larger down payments for lower scores.

Here’s what I see in real life:

• 740+ scores: Best rates available, easiest approval
• 680-739 scores: Good rates, smooth process
• 620-679 scores: Higher rates, need strong income/assets
• 580-619 scores: Limited to FHA/VA, higher rates
• Below 580: Very limited options, need significant down payment

Credit Score Ranges Explained

800-850 (Exceptional): You’ll get the best rates available. The average credit score is 717 and most Americans have scores between 600 and 750.

740-799 (Very Good): Excellent rates and terms. Easy approval process.

670-739 (Good): Good rates. Most loan programs available.

580-669 (Fair): Higher rates. FHA and VA loans are your best options.

300-579 (Poor): Very limited options. Focus on improving credit first.

Don’t get hung up on ranges. Focus on what you need for your target loan program.

What If Your Score Is Too Low Right Now?

Don’t panic. You have options.

If You’re Below 580:

Focus on credit repair first. Pay down credit cards. Dispute errors on your credit report. Make all payments on time for at least six months.

Some FHA lenders will work with 500-579 scores, but you’ll need 10% down and strong compensating factors.

If You’re 580-619:

FHA loans are your best bet. Focus on saving for down payment and closing costs while making all payments on time.

Alternative Credit:

If you don’t have traditional credit, you can use alternative tradelines like rent, utilities, or cell phone payments to show payment history.

Common Credit Myths That Cost You Money

Myth 1: “I need perfect credit to buy a house.”

Not true! You can buy with a 580 FHA loan or even lower in some cases.

Myth 2: “I should pay off all my credit cards completely.”

Actually, keeping small balances under 10% utilization can help your score more than zero balances.

Myth 3: “Checking my credit score hurts it.”

Soft inquiries don’t hurt your score. Only hard inquiries from applying for credit do.

Myth 4: “I need to wait years after bankruptcy to buy.”

You can get a VA loan just two years after Chapter 7 discharge, FHA loans sometimes sooner.

Myth 5: “Mortgage shopping will tank my score.”

Multiple mortgage inquiries within 14-45 days count as one inquiry.

Quick Ways to Boost Your Score

Pay Down Credit Cards: This has the biggest immediate impact. Get utilization under 30%, ideally under 10%.

Pay Bills on Time: Set up autopay for at least minimum payments. Payment history is 35% of your score.

Don’t Close Old Cards: Keep old accounts open to maintain credit history length.

Dispute Errors: Check your credit report for mistakes and dispute them. You can get a free copy at AnnualCreditReport.com.

Become an Authorized User: Ask family members to add you to their accounts with good payment history.

Most people can see a 20-50 point improvement in 60-90 days with focused effort.

The Real Numbers That Matter in 2025

Let me give you some real-world examples of what different credit scores cost you:

$350,000 Loan, 30-Year Fixed:

• 760+ Score: 6.0% rate = $2,098/month
• 680 Score: 6.5% rate = $2,212/month (+$114/month)
• 620 Score: 7.5% rate = $2,448/month (+$350/month)

Over 30 years, that 620 score costs you about $126,000 more than the 760 score. But here’s the thing – you can always refinance when your credit improves.

The real question is: Should you wait to improve your credit or buy now and refinance later?

In markets where home prices are rising 4-6% annually, waiting might cost you more than the higher interest rate.