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Credit Scores For Home Loan Approval

November 8, 2023

New FHA Home Loan

What credit score do you need to be approved to buy a home? The answer to that question can change depending on the type of home loan you seek and the options you want. 

For example, FICO score requirements to be approved for a manufactured home loan may be lower than those who want to build a home from the ground up using a One-Time Close construction loan due to elevated risk to the lender.

Construction loans are higher-risk transactions for a participating lender than manufactured homes. That means the FICO score requirements from your lender are likely to be different than a government-backed home loan program’s minimums.

What FICO scores do you need to be approved to buy a home?

FHA FICO Score Requirements

FHA loan guidelines say FICO scores of 580 or higher qualify for the lowest down payment. Lender standards may be higher than this.

You should have a conversation with each lender you compare to see how far above the FHA’s 580 minimum you may need to go to satisfy a particular lender’s standards. On paper, borrowers with FICO scores between 500 and 579 may qualify for a 10% down payment but the lender’s standards also factor into this scenario.

Conventional Home Loan FICO Scores

The consumer website Homebuyer.com recommends a FICO score of 620 or better if you are applying for a conventional mortgage. Conventional home loans are the most common type but require private mortgage insurance.

This is true except in cases where the buyer pays 20% down or more.

Some conventional mortgages may feature a penalty for early payoff of the loan. You may wish to shorten your loan term using larger payments or refinancing, but be sure to check the fine print on the loan you want to see if you’ll get “dinged” for early payoff.

FICO scores of 620 are typical for conventional loan approval, but lender standards may vary depending on the housing market and other variables. 

USDA Home Loan FICO Score Requirements

USDA loans are different than other government-backed mortgage loan programs in that they are need-based government-backed mortgages. As such, they may have income caps and purchase price restrictions to think about before you commit.

Homebuyer.com reports USDA loans require a minimum FICO score to qualify of 580.

VA Home Loan FICO Score Requirements

The Department of Veterans Affairs does not have a specific FICO score listed in its lender guidelines. Instead, the lender is responsible for setting the minimums, which typically start at 580 but may run as high as 640 or better.

Borrowers applying for VA mortgages with non-VA borrowers may do so but only the veteran’s portion of the loan can be guaranteed by the Department of Veterans Affairs. That can be an important consideration for some, depending on circumstances.

You may have difficulty finding a lender willing to approve a purchase loan if your FICO scores aren’t at least in the 580-or-better range. Typical FHA loan approval happens for scores closer to the 620 range, depending on the lender.

Joe Wallace - Staff Writer

By Joe Wallace

Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.

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