What Credit Score You Need to Buy a House
Every loan program sets its own floor, lenders add their own on top, and the score is only one of four things an underwriter weighs. Here is the honest picture.
The honest answer to “what score do I need” is that there are three answers, and people usually get told only the first one.
There is the program minimum, set by FHA, VA, USDA, Fannie Mae, or Freddie Mac. There is the lender’s overlay, which is that lender’s own higher floor. And there is the score at which the loan is actually affordable, which is usually well above both.
FHA: 580 with 3.5% down; 500–579 with 10% down. Conventional: generally 620. VA: no VA-set minimum — lenders typically require 580–620. USDA: no agency minimum — 640 is the common lender threshold for streamlined processing. These are floors, not targets, and every one of them can be raised by the lender in front of you.
Program by program
FHA. The most accommodating of the major programs, and the reason it exists. 580 gets you the 3.5% down payment. Between 500 and 579 you can still qualify with 10% down, though comparatively few lenders will write that loan. The tradeoff is mortgage insurance: FHA charges an upfront premium plus an annual premium that, on most current loans, lasts for the life of the loan unless you refinance out of FHA entirely.
Conventional (Fannie Mae / Freddie Mac). Generally 620 minimum, with pricing that improves sharply as the score rises. The key advantage over FHA is that private mortgage insurance can be cancelled once you reach sufficient equity — it is not permanent. Below roughly 680, conventional pricing often becomes worse than FHA; above roughly 720, conventional usually wins.
VA. For eligible service members, veterans, and certain surviving spouses. The VA itself sets no minimum credit score; lenders do, typically 580 to 620. No down payment required and no monthly mortgage insurance, which makes it the strongest program available to anyone eligible. If you are eligible and someone is steering you to FHA, ask why in specific terms.
USDA. For eligible rural and many suburban areas, with income limits. No agency minimum score, but 640 is where the automated system processes smoothly; below that requires manual underwriting. No down payment required.
The overlay problem, and what to do about it
A lender overlay is a requirement a lender adds above the program minimum. FHA allows 580; a particular lender may require 640 for the same FHA loan. That is entirely permitted, and it is why “I was denied” and “I do not qualify” are different statements.
The practical consequence is that shopping lenders matters more at lower scores than at higher ones. At 760 most lenders will approve you and you are shopping on price. At 600 you are shopping on whether anyone will lend at all, and the variation between lenders is enormous.
Worth knowing:
- Mortgage brokers submit to many lenders and often find a program a single bank will not offer.
- Credit unions and local banks frequently have lower overlays than national retail lenders, and some hold loans in portfolio with their own standards entirely.
- Multiple mortgage inquiries inside a short window count as one for scoring purposes — typically 14 to 45 days depending on the model. Shopping several lenders is expected behaviour, not a penalty.
The score they use is not the score you see
This surprises nearly everyone. Mortgage lenders do not use the score in your banking app.
They pull a tri-merge report — all three bureaus at once — and use specific, older FICO versions required by the agencies. Those versions frequently produce different numbers than the VantageScore or newer FICO your card issuer shows for free. Sometimes noticeably lower.
Two consequences follow:
Do not plan around the free score. Treat it as a directional indicator, not the number that will be used.
The middle score is what counts. With three scores, the lender uses the middle one — not the average, not the highest. On a joint application, the standard practice is to take the lower borrower’s middle score. One applicant with a strong file cannot lift a co-applicant’s weak one.
That last rule has a real strategic implication for couples, and it is worth discussing with a loan officer before deciding who applies.
What the score is not
The score is one of four things an underwriter weighs, and it is not always the binding one.
Debt-to-income ratio. Your monthly obligations against your gross monthly income. Program limits vary and compensating factors can stretch them, but DTI denies more applications than score does. Paying down a car loan can matter more than gaining 20 points.
Down payment and reserves. More money down reduces the lender’s risk and can offset a weaker score. Reserves — months of payments left in the bank after closing — are a genuine compensating factor.
Employment and income stability. Generally a two-year history in the same field. Self-employment requires two years of tax returns. A recent job change within the same industry is usually fine; a change of industry, or a move from W-2 to self-employed, restarts a clock.
The rest of the credit file. Recent lates, unresolved collections, a bankruptcy or foreclosure inside its waiting period — all of these are read directly, not just through the score. Two people with identical 640s can get opposite answers because one has a clean 24 months and the other has a 60-day late from March.
A bankruptcy or foreclosure sets a program-specific waiting period measured in years from discharge or completion, regardless of how good your score has become since. FHA, VA, and conventional all use different periods, and some allow reductions for documented extenuating circumstances. If either is in your history, ask a loan officer about the specific waiting period early — it may be the actual constraint on your timeline, not your score.
What the score costs you
The floor is where you qualify. The pricing is where the score shows up in your life every month for thirty years.
Conventional loan pricing is tiered by score and down payment, and the difference between a 640 and a 740 is typically a materially higher interest rate — plus, at lower scores, a higher mortgage insurance premium. Over a thirty-year term, that difference commonly runs to tens of thousands of dollars on a typical loan.
We are deliberately not printing a rate table here. Rates and the pricing grids move, and a number published today would mislead you next quarter. What is durable is the shape: the payment difference between qualifying and qualifying well is large, and it lasts as long as the loan.
Ask any lender for a pricing comparison at your current score and at 20 points higher. They can run it in minutes. If those 20 points are reachable in a few months, that conversation is the most valuable hour in this entire process.
What to do with this
If you are more than six months out, there is real room to improve the file. Start with how to fix your credit before buying a home.
If you are close to applying, be careful about what you touch — disputes in particular can stall an approval in a way almost nobody warns about. Read disputes and mortgage approval: the timing trap first.
And if your score is low right now, that is not a closed door. It is a program question and a timeline question, and both have answers: first-time homebuyer with bad credit.