The credit score you need for a home loan varies on the type of loan you apply for. Some loans specify a credit score, while others don’t. Some require a percentage of the mortgage as a down payment while others don’t. Each lender and type of loan is different.
For example, Veterans Affairs loans (specifically for veterans, active-duty service members, and surviving spouses) typically do not require a down payment but may have a minimum credit score requirement. A United States Department of Agriculture (USDA) loan does not specify a credit score, but lenders usually seek a credit score of at least 640. These loans are applicable only for properties purchased in designated rural areas. Federal Housing Administration (FHA) loans need at least a 580 FICO Score with at least a 3.5% down payment (which amounts to $10,500 on a $300,000 home). Conventional loans require a minimum FICO® Score of 620 along with a 3% down payment (which amounts to $9,000 on a $300,000 home).
Consider all your available options, build your credit score, and save up for a down payment before you buy a house so that you can get the best out of what will probably be the largest investment in your credit history.
