What's the Minimum Score to Qualify for a Home Loan?

What is the minimum credit score I need to get a home loan mortgage? I want to refinance my home loan mortgage and I want to know what the minimum credit score is.

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Minimum Credit Score for Mortgage Loan?
Bill's Answer: Answered by Betsalel Cohen

Thank you for your question about minimum credit scores for mortgage loans. Credit scores are one of the important factors in qualifying for a mortgage loan.

There is no simple answer to your question, because the minimum credit score depends on the loan program you apply for and the individual lender’s own guidelines and rules. They also depend on other qualifying factors such as your Loan to Value ratio (LTV) and Debt-to-Income ratio (DTI).

The housing and mortgage crash of 2007-2008 reset the underwriting rules and virtually wiped out the subprime mortgage market. If you want to qualify for a loan, then you need to make sure that your LTV, DTI, and Credit Score/History meet the lender’s guidelines.

To help you understand about minimum credit scores and mortgages, here are the topics I will cover:

  • FICO Scores: The Basics
  • Minimum FICO Scores: Different Loan Types 
  • Qualifying for a Mortgage: Not just Credit Scores

FICO Scores – Minimum Credit Scores

Although there are different credit scores available, the most popular one is the Fair Isaac & Co. (FICO) Credit Score. Mortgage lenders use specific FICO scores to judge your credit worthiness. Although you can purchase Credit Scores and even FICO scores, they are not always the same as the one used by the lender. The FICO score ranges from a low of 300 to a high of 850.

Tip Looking for a mortgage purchase or refinance loan?
Get a mortgage quote and pre-approval from a Bills.com mortgage provider.

FICO scores are based on your credit history, as reported by the consumer credit reporting agencies — Equifax, Experian, and TransUnion. Here are the top three factors of your FICO score:

  1. Timely Payments: Do you make your payments on time? This is the most important factor.
  2. Credit utilization: How much of your line of credit do you use? For example if you have a $10,000 line of credit, do you use up $9,000, $3,000 or pay off your balances each month).
  3. Credit Mix: Do you have different types of credit such as credit cards, installment loans, mortgage loans, auto loans and student loan?
Tip Monitor your Credit Report. Make sure that you monitor your credit report by getting one free report each year from each CRA at AnnualCreditReport.com. If you want to more closely monitor your credit report, and also see your credit score, then sign up, for a free trial period, for a credit report with credit score.

If your credit score is low, then follow these steps:

  • Inaccurate Items: Read the Bills.com article about credit repair and learn how to dispute any inaccurate items that appear on your credit report.
  • Overall Poor Credit: Read the Bills.com article for tips on how to improve your credit score. If your score is low, then you might start with a secured card. Make sure that you set up a budget and make all of your payments on time.
Tip If you struggle with credit card debt, then get a free consultation with a Bills.com pre-screened debt provider.

Minimum Credit Score and Types of Loans

In general, most loan programs have underwriting rules that set an acceptable minimum credit score. Lenders often add on their own stricter rules. In addition, lenders take into account other factors such as your loan to value ratio, debt to income ration, and compensating factors such as asset portfolio. For example, a conventional loan with an 80% LTV may require a FICO score of 620, whereas a 95% LTV requires a 720 score.

Here are some general guidelines. Remember, loan programs have many rules and lenders often have even stricter rules. So make sure that you shop carefully.

FHA Loans:

An FHA loan has lenient credit score requirements. The minimum credit score required is 500, but your down payment must be at least 10%. If your credit score is over 580, then you can get an FHA loan with a down payment of 3.5%. The FHFA tightened its requirements, so that anyone with a DTI over 43% and a FICO score under 620 will have a hard time qualifying. (The lender must manually underwrite the loan, carefully documenting the compensating factors.

Tip Most lenders have stricter rules than those set down by the FHA. The general rule is that you must have a Credit Score of at least 620. Also, the FHA loan has high Mortgage Insurance Premiums, as both Upfront Mortgage Insurance and Monthly Insurance Payments are required. Made sure that you shop around for the mortgage most appropriate to your situation.

Conventional Loans (Fannie Mae and Freddie Mac Loans)

Fannie Mae requires at least a 620 for a FRM, 640 for an ARM, and 720 for an I/O. If you want a higher LTV than 80%, then you will need a higher FICO score. If you have a score of over 680, then a Conventional loan is a good option for financing up to 95%% financing with mortgage insurance. Even if your FICO score is lower (over 620), then you may qualify for a conventional loan with 80% LTV. You will need to meet any stricter credit and income requirements, as well as lender overlays.

Tip Looking for a mortgage purchase or refinance loan? Get a mortgage quote and pre-approval from a Bills.com mortgage provider.

Jumbo Loans

Jumbo loans whose loan limits are higher for either conforming loans or high-balance loans (super-conforming). For most parts of the US the limit is $417,000 and about $625,000 in high cost areas. There are higher amounts for Alaska, Hawaii, Guam and the US Virgin Islands. The minimum credit score varies from lender to lender. A minimum score of 720 is required although give strong compensating factors, lenders will go down to 680. If you need a larger loan, then your option is a jumbo loan. In general, you will need a strong credit score, LTV under 70% and strong income.

VA Loans

VA loans have less stringent requirements. Lenders generally require a minimum score of 620. A veteran with a VA eligibility card can get up to 100% financing Subprime Loans Subprime loans are for those with poor credit, generally low credit scores, but also other credit history factors or high DTI. They have virtually disappeared since the crash of 2007-2008. Beware of predatory lenders offering high cost loans (interest rates and fees). A loan with an artificially low beginning payment is a high-risk loan.

Special Refinance Programs:

There are special refinance programs, which do not require a minimum credit score, although lenders often have stricter requirements. Here are some of the programs:

  1. HARP 2 Mortgage Loan: If you have a Fannie Mae or Freddie Mac loan, originated and delivered before June 1, 2009, then you may be eligible for a HARP mortgage refinance loan. This is available even if your home is worth less than your loan balance. The HARP loans have no credit requirements if you do the loan through your original lender/same servicer, and a minimum credit score of 620 if you take a HARP loan through a new lender. 
  2. FHA Streamline: There is no minimum credit score for a FHA streamline. If your original loan was originated before June 1, 2009, then you can refinance with reduced mortgage insurance premiums.
Tip Are you eligible for HARP? FHA Streamline?
Bills.com can help you find a loan. With rates at historic lows, it pays to apply now.

Qualify for a Mortgage Loan: Not Just Minimum Credit Scores

By correctly preparing your finances, you will qualify for a mortgage that best suits your needs, at the best rates possible. Learning about your credit score is an important step in the mortgage qualification process. Although you will need a minimum credit score to qualify for a loan, it is not the only criteria.

I recommend that you read the Bills.com article about qualifying for a mortgage home loan and learn about two other areas the lender looks at:

  1. Debt to Income Ratio: Controlling your overall debts will help you qualify for a mortgage loan and make your payments more affordable.
  2. Loan to Value Ratio: By saving money and having at least a 20% down-payment, you will be able to avoid mortgage insurance. In general, you will be able to qualify for a mortgage with a lower credit score.

After preparing yourself to qualify for a mortgage loan, shop around.

You will find that different lenders have different criteria. Shop around with different lenders. Not only will there mortgage rates and mortgage fees differ, but you may qualify with one lender and not another lender. Get a mortgage quote from Bills.com mortgage providers.

I hope this information helps you Find. Learn & Save.




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Comments (15)

Mark C.
Playa Del Rey, CA  |  January 02, 2014
Are there any changes that will take place in 2014 to make it easier to qualify for a loan with less than excellent credit?
January 31, 2014
As of now, the best mortgage option for a person whose credit is not good remains an FHA loan. While many, if not most, FHA lenders require a minimum credit score of 620, there are FHA lenders who go down to 580.
William O.
Aurora, CO  |  March 17, 2014
You may want to check into the NACA Programs, If they work in your area, they will not only get you approved, but you will get around a 4% mortgage through them. http://www.naca.com
Michael M.
December 28, 2011
I have 3.5% downpayment. I have a 623 credit, my wife has a 630. And we make nearly 6 figures a year. Yet we are having a terrible time getting a loan!!!! I have paid off many of things this year, which seems to be a problem. Any suggestions?
December 29, 2011
I recommend that you read the Bills.com article about FHA loans, which require low down-payments, and less stringent credit history requirements. You can seek a pre-approval by applying for an FHA mortgage loan. If one lender says "no," it does not mean every lender necessarily will.
Jason P.
Cambridge, MA  |  November 16, 2011
Will the new HARP program have a minimum credit score requirement?
November 16, 2011
As of today, November 16th, it is not exactly clear what the credit requirements will be for a new HARP mortgage.

Some of it will depend on whether or not your new HARP payment increases your current payment by more than 20. If so, there will be a minimum credit score of 620. However, my reading of the guidelines released so far has not found a credit score requirement for someone whose payment is not increasing by more than 20%.

More details will be coming out, as lenders and investors chew over the Fannie Mae and Freddie Mac releases about HARP. Please check back with Bills.com, as we will be following the HARP rules closely and reporting on them as they develop.
Jason W.
Ramseur, NC  |  August 01, 2011
My credit score is above the recommended beacon score of 640 and I have had a steady income that has increased every year for the last seven years. However I don't know my debt to income ratio. Will I still be able to get a loan?
August 01, 2011
Lenders are going to look at your credit scores from all three of the main credit bureaus, and scores can differ from bureau to bureau. 640 is a fair score, but will not qualify you for the best rates available. Lenders are looking for 720 scores from borrowers seeking prime loans.

Your debt-to-income ratio is crucial to qualifying for a mortgage and for determining what size mortgage payment you can handle, if any. Your DTI is determined by looking at your gross income, your new mortgage principal, interest, taxes and insurance costs, and your costs for certain monthly bills, such as a car payment, student loan payment, or monthly credit card required minimum payments. If you divide those monthly costs by your gross income, you come up with your DTI. In general, you can't have a DTI over 44% and qualify for a loan these days.

I suggest that you speak with a lender or three to see what you qualify for now or what barriers there are to qualifying (credit or income, for instance), so you can work on addressing them if necessary
Larry K.
Stafford, VA  |  February 22, 2011
Is there a minimum credit score that I need to avoid having to pay for Private Mortgage Insurance on my home loan?
February 22, 2011
While there is a minimum credit score required to qualify for a home loan, there is not a minimum credit score required. Private Mortgage Interest (PMI) is generally required when a borrower has less than a 20% equity stake in the home. PMI protects the lender, in case the borrower defaults.
Larry J.
Portland, OR  |  February 15, 2011
Right now, my credit score is below the minimum credit score for a home loan refi. From what the loan officer said, I only need to raise my score by about 20 points, in order to qualify for the refinance. Is there a recommended course of action that I should follow to raise my score?
February 15, 2011
I can't recommend specific actions to boost your score, without knowing more about your credit history. Your credit score is based on all the accounts that show on your report, your payment history on those accounts, how much debt you are carrying on each card compared to the credit limit the creditor granted you, how long you have had accounts open, etc.

I can, however, recommend an approach to you that should help you raise your score so it exceeds the minimum credit score for a home loan. I suggest you read about the rapid rescore program.

A Rapid Rescore is just what the name implies. The borrower takes a few quick actions and then the borrower’s credit report is pulled again, usually with very positive results.

Here is how it works: The broker or loan officer will call the credit score provider and request that one of their experts review the credit report. Sometimes the borrower may also be included in a conference call. The analyst at the credit report provider gives his or her expert advice on what specific steps the borrower can take in order to raise his or her FICO. Recommended actions could include a borrower paying down credit card balances to a certain level or getting letters from collection agencies that show the debt has been paid.

Once the borrower has completed his or her part of the arrangement, the credit score provider will perform the Rapid Rescore. Most providers charge a fee for this, usually around $100 for all three credit bureaus. The Rapid Rescore takes about three days and the results are usually very positive.

If the lender you are currently working with doesn't offer the rapid rescore service, I suggest you search for a lender who does.
Meredith M.
New York, NY  |  February 11, 2011
If I meet the minimum credit score requirements but my does not, can I still get a loan? I am the primary breadwinner.
February 11, 2011
If both of you are on the loan, then both of your credit scores will need to meet the lenders criteria minimum credit score for a home loan. If your income is strong enough to qualify for the loan on your own, then your wife's credit score will not be an issue. If you can't qualify on your own, you may want to focus on ways to improve her credit score.
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