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What Credit Score Do I Need to Buy a House?

Most mortgage programs available today require a minimum FICO credit score. However, a lot of people ask, “what is the minimum credit score required to get a mortgage”?

For conventional loans (those with guidelines established by Fannie Mae or Freddie Mac), the minimum score can vary based upon the amount of down payment, the client’s credit history, employment status, the type of property, etc. Buyers with higher credit scores are going to be offered the best rates, however there are plenty of mortgage options available for people with less than perfect credit.

If you’re buying a new primary residence and don’t have any credit, your loan officer can use certain non-traditional credit sources to determine sufficient payment history. In those situations, your lender will be looking for compensating factors to offset the risk of the lower credit score. Having a few months cash reserves left over after closing (three months reserves is usually the magic number), or a low debt to income ratio can sometimes help overcome a low credit score.

Government-backed loans can also have a minimum credit score requirement. FHA will usually require a minimum score of 580, but can go as low as 500 if the lender justifies making the scoring exception. The Department of Veteran’s Affairs does not issue a minimum score requirement for VA loans. They leave that decision to the individual lender. USDA’s automated underwriting system, which is used for certain loans in rural areas, will usually require a minimum credit score of 640. These minimums apply to loans submitted through Fannie Mae, Freddie Mac or Ginnie Mae’s automated underwriting system. When a lender approves a loan manually (without using the automated system), the lender has the discretion to approve a loan with scores lower than the stated minimum…as long as the lender can document other compensating factors to justify the decision.

Credit scores are important, but are just one of many factors that go into the underwriting process. The best way to find out what you qualify for is to have a consultation with your experienced, local mortgage broker.

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