Published by Bankrate

Written byRuben Caginalp

Co-written byAllison Martin

A conventional loan requires a credit score of at least 620, but it’s ideal to have a score of 740 or above, which could allow you to make a lower down payment, get a more attractive interest rate and save on private mortgage insurance.

An FHA loan is accessible with a credit score as low as 580 or 500, depending on the down payment amount. That said, taking out an FHA loan with a very low credit score can still be a challenge, since lenders can impose their own higher credit minimums.

The U.S. Department of Veterans Affairs (VA) doesn’t set credit minimums for VA loans, but many VA lenders have their own credit requirements, typically in the low- to mid-600s. Similarly, USDA loans don’t have a credit score requirement by U.S. Department of Agriculture standards, but you should still be prepared to meet the minimum set by lenders, usually 640.

Credit scores and mortgage rates
Generally, the higher your credit score, the lower your mortgage rate and the less you’ll pay on a monthly basis and in interest overall. Depending on your credit, a 30-year fixed-rate mortgage for $286,400 could cost you:

Credit score APR Monthly mortgage payment Interest total
APRs as of Dec. 2022 Source: myFICO
760-850 6.229% $1,760 $347,022
700-759 6.451% $1,801 $361,968
680-699 6.6628% $1,834 $373,991
660-679 6.842% $1,875 $388,648
640-659 7.272% $1,958 $418,490
620-639 7.818% $2,065 $457,100
Average mortgage debt by age group
Americans typically begin borrowing in young adulthood as they face major expenses like housing and education at a lower income level. They tend to borrow at a slower pace in middle age as incomes rise. As they age, Americans start deleveraging as they pay off their loans.

Generation Average credit score Average mortgage debt
Source: Experian State of Credit Report, 2021
Silent generation 729 $163,254
Baby boomers 724 $198,203
Generation X 685 $259,100
Millennials 667 $255,527
Generation Z 660 $192,276
Average credit score by state
The credit health of Americans varies across states. Minnesota has the highest average credit score, 742, followed by Vermont (736) and Wisconsin (735), according to Experian data. Mississippi (681) and Louisiana (689) have the lowest average scores.

Other factors in mortgage preapproval
Along with credit history and score, mortgage lenders take into account your:

Employment history and income: Lenders want to see that you have a reliable source of income and a paper trail to prove it. Two or more years at the same company is a plus, and be prepared to provide tax returns from the last two years, as well.
Down payment: A larger down payment can help you get approved and obtain a more favorable interest rate, but be careful not to eat into your emergency savings.
Debt-to-income ratio: Lenders use your debt-to-income (DTI) ratio as a critical measure of an affordable monthly mortgage payment. A DTI ratio that’s too high could limit your options, even if you have good credit and stable income.
Assets: You could be a more attractive borrower overall if you have substantial savings and other assets, like investment or retirement accounts.
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What credit score is needed to buy a house with no money down?

Your credit score can have an impact not only on your ability to get a mortgage, but also on the loan’s rate and terms. Mortgage lenders consider your score, alongside other factors like employment, income and debt, to determine whether you can realistically afford the home you want. While some mortgage programs open the door for those with lower credit scores, a higher score means you won’t be burdened with higher costs, so the better your score, the cheaper your mortgage overall.

https://www.bankrate.com/real-estate/average-credit-score-to-buy-a-house/

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