House Hunting: What Is the Best Score to Buy a House?
Only around five percent of American adults have perfect credit. Meanwhile, the average US credit score was only 703 in 2019.
Credit is critical for many of life's biggest events, and buying a house is no different. Yet, you can't just have any credit score to buy a house.
What credit score is needed to buy a house? We're answering these questions and more next, so keep reading.
What Is a Good Credit Score?
Credit scores range from 300 (poor) to 850 (perfect). Different credit bureaus rank credit scores differently. But, in general, credit scores break down like the following:
- 300–600: Poor
- 601–700: Fair
- 701–720: Good
- 720–850: Excellent
Most people's credit falls within the fair to good range. But if you want to buy a house, the higher your credit score, the better.
What Is the Best Credit Score to Buy a House?
Getting a mortgage is one of the first steps to buying a house. But, to get a mortgage, you usually need a credit score of 580 to 850. If you want a competitive interest rate, scoring above a 740 is ideal.
Here's what kind of loan you can qualify for with your current credit score.
Traditional Home Loans
Traditional home loans offer competitive interest rates. They're also highly available as most financial institutions offer these loans.
If you want a conventional loan, you need at least a 620 credit score. You may still have access to traditional mortgages with a lower score. However, your interest rate will be higher.
Federal Housing Administration Loans
The Federal Housing Administration (FHA) offers loans for people with less-than-stellar credit history.
If you want an FHA loan and a 3.5 percent downpayment rate, you need a 580 credit score. But you only need a score of 500 when you have at least a 10 percent downpayment.
And the best part is that, though your credit score is lower, you'll still have access to low-interest loans. The FHA also provides down-payment assistance (DPA) for qualifying applicants.
The Veterans Affairs (VA) department offers low-interest, low-credit score mortgages to veterans. There's no minimum credit score for VA home loans. Check with your lender to verify their minimum score for VA loans.
The US Department of Agriculture (USDA) also has a unique home loan program for rural homebuyers. Applicants must live in a rural or suburban area and make at least 115 percent less than the median income. If you meet these stipulations, your lender may also require a credit score of 620 or higher.
How to Buy a House When You're Credit Invisible
44 million American adults are credit invisible. Luckily, you can still get a home loan with no credit to speak of.
How? Alternative credit ratings are payment records showing how you pay debts on time. These reports track your payment history with rental landlords, utility providers, and savings accounts to prove your creditworthiness.
With an alternative credit rating, you can qualify for a home loan without needing years of actual credit history.
We're Here to Help You Get a Home Loan
The credit score you need to buy a house varies by loan and loan provider. But even if you don't have credit, you can still get a home loan with alternative credit scoring.
Want to know your alternative credit score? Create a Connect account and check your score right now!