Images by Getty Images; Illustration by Austin Courrege/Bankrate
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.
2022 mortgage and credit score statistics
- 768 is the median credit score in the U.S. for those taking out a mortgage, according to Q3 2022 Federal Reserve Bank of New York data.
- The average credit score for first-time homebuyers is 746, according to a recent report from FannieMae.
- Minnesota is the state with the highest average credit score in the country, at 742, according to a 2022 Experian report.
- Residents of Mississippi have the lowest average credit scores nationwide at 681.
- The average mortgage debt is $229,242, per Experian’s most recent State of Credit data.
- Generation X borrowers have the highest average mortgage debt, at $259,100.
Credit score to buy a house
| Type of loan | Minimum credit score |
|---|
| Conventional | 620 |
| FHA | 580 |
| VA | No requirement, but generally low- to mid-600s |
| USDA | No requirement, but generally 640 |
Some types of mortgages have specific minimum credit score requirements.
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.
FAQs
Improving your credit score can help you qualify for better mortgage rates. Start by getting current on any past due accounts, if applicable, and be sure to make timely payments moving forward. Pay down any credit card debt as much as you can, and if you owe in many different places, consider a debt-consolidation loan that rolls all your debts into one single monthly payment. Other ways to increase your credit score include avoiding applications for new credit and leaving old accounts in good standing open.
What credit score do you need to buy a house? Generally speaking, the higher the better. At the low end of the range, buyers with a credit score as low as 500 could be eligible for an FHA loan with a down payment of 10 percent; a score of 580 would require just 3.5 percent down. But you’d have to pay for private mortgage insurance as well. If you can get your score up to 620, you might qualify for a conventional loan or VA loan.
FICO scores range from 300 to 850, the higher the better. Any score above 670 is considered “good” — but scores of 740 to 799 are very good, and above 800 is exceptional.
It depends on the lender and loan program. USDA and VA loans are government-backed options without credit score minimums, but most lenders prefer a credit score of at least 640 and 620, respectively. To qualify for a no-down-payment mortgage through a commercial or private lender, you’ll likely need excellent credit.
FAQs
Some mortgage lenders are happy with a credit score of 580, but many prefer 620-660 or higher.
What credit score is needed for a $350 000 house? ›
Some mortgage lenders are happy with a credit score of 580, but many prefer 620-660 or higher.
What is a good credit score for buying a house? ›
It's recommended you have a credit score of 620 or higher when you apply for a conventional loan. If your score is below 620, lenders either won't be able to approve your loan or may be required to offer you a higher interest rate, which can result in higher monthly payments.
Is a 720 credit score good enough to buy a house? ›
Home loans
Assuming you have enough income, a 720 credit score is likely high enough to help you get a government-backed mortgage such as an FHA for VA loan. However, it's probably not high enough to get the lowest interest rates available.
Can I buy a house with 672 credit score? ›
Generally speaking, you'll need a credit score of at least 620 in order to secure a loan to buy a house. That's the minimum credit score requirement most lenders have for a conventional loan. With that said, it's still possible to get a loan with a lower credit score, including a score in the 500s.
Can I afford a 300K house on a 70K salary? ›
On a $70,000 income, you'll likely be able to afford a home that costs $280,000–380,000. The exact amount will depend on how much debt you have and where you live — as well as the type of home loan you get.
Can I buy a 300K house with 60k salary? ›
To purchase a $300K house, you may need to make between $50,000 and $74,500 a year. This is a rule of thumb, and the specific salary will vary depending on your credit score, debt-to-income ratio, type of home loan, loan term, and mortgage rate.
How rare is a 720 credit score? ›
46% of consumers have FICO® Scores lower than 720. The best way to determine how to improve your credit score is to check your FICO® Score.
How much money can you borrow with a 600 credit score? ›
The amount you can borrow will vary by lender, but you can typically take out a loan between $1,000 and $50,000 with a 600 credit score. Keep in mind that the more you borrow, the more you'll pay in interest.
How accurate is credit karma? ›
Here's the short answer: The credit scores and reports you see on Credit Karma come directly from TransUnion and Equifax, two of the three major consumer credit bureaus. The credit scores and reports you see on Credit Karma should accurately reflect your credit information as reported by those bureaus.
Anyone with a minimum credit score of 500 can apply for an FHA loan. But if you already have a 620 or higher credit score, it makes more sense to go for a conventional mortgage.
How can I build my credit fast? ›
The quickest ways to increase your credit score
- Report your rent and utility payments. ...
- Pay off debt if you can. ...
- Get a secured credit card. ...
- Request a credit limit increase. ...
- Become an authorized user. ...
- Dispute credit report errors.
The credit-building journey is different for each person, but prudent money management can get you from a 500 credit score to 700 within 6-18 months. It can take multiple years to go from a 500 credit score to an excellent score, but most loans become available before you reach a 700 credit score.
What is the average credit score by age? ›
Average FICO Score Nearly Unchanged Among All Generations
| Average FICO® Score by Generation | | |
|---|
| Generation | 2021 | 2022 |
|---|
| Silent Generation (77+) | 760 | 760 |
| Baby boomers (58-76) | 740 | 742 |
| Generation X (42-57) | 705 | 706 |
2 more rowsFeb 24, 2023
The Bottom Line. Obtaining a mortgage will affect your credit score, and while it might dip slightly at first, your credit score can improve by making consistent, timely mortgage payments every month. Once your credit score is on the rise, you'll likely see better terms and interest rates for future loans you take on.
How big of a loan can I get with a 720 credit score? ›
You can borrow $50,000 - $100,000+ with a 720 credit score. The exact amount of money you will get depends on other factors besides your credit score, such as your income, your employment status, the type of loan you get, and even the lender.
How much income do you need to buy a $400000 house? ›
Assuming a 30-year fixed conventional mortgage and a 20 percent down payment of $80,000, with a high 6.88 percent interest rate, borrowers must earn a minimum of $105,864 each year to afford a home priced at $400,000.
How much is 70K a year hourly? ›
$70,000 a year is how much an hour? If you make $70,000 a year, your hourly salary would be $33.65.
How much income do you need to buy a $650000 house? ›
Based on the current average for a down payment, and the current U.S. average interest rate on a 30-year fixed mortgage you would need to be earning $126,479 per year before taxes to be able to afford a $650,000 home.
How much does a couple need to make to buy a $200 K house? ›
What income is required for a 200k mortgage? To be approved for a $200,000 mortgage with a minimum down payment of 3.5 percent, you will need an approximate income of $62,000 annually.
If you make $60,000 a year, your hourly salary would be $28.85.
How much house can I afford if I make $5000 a month? ›
Figure out 25% of your take-home pay.
Let's say you earn $5,000 a month (after taxes). According to the 25% rule I mentioned, that means your monthly house payment should be no more than $1,250.
Does anyone have 900 credit score? ›
A 900 credit score may be the highest on some scoring models, but this number isn't always possible. Only 1% of the population can achieve a credit score of 850, so there's a certain point where trying to get the highest possible credit score isn't realistic at all.
Does anyone have 850 credit score? ›
While achieving a perfect 850 credit score is rare, it's not impossible. About 1.3% of consumers have one, according to Experian's latest data. FICO scores can range anywhere from 300 to 850. The average score was 714, as of 2021.
How many people have 800 credit score? ›
Your 800 FICO® Score falls in the range of scores, from 800 to 850, that is categorized as Exceptional. Your FICO® Score is well above the average credit score, and you are likely to receive easy approvals when applying for new credit. 21% of all consumers have FICO® Scores in the Exceptional range.
Can I get a $20000 loan with a 700 credit score? ›
You will likely need a credit score of 660 or higher for a $20,000 personal loan. Most lenders that offer personal loans of $20,000 or more require fair credit or better for approval, along with enough income to afford the monthly payments.
Can I get a 20k loan with 750 credit score? ›
You should have a 640 or higher credit score in order to qualify for a $20,000 personal loan. If you have bad or fair credit you may not qualify for the lowest rates. However, in order to rebuild your credit you may have to pay higher interest rates and make on-time payments.
Can I get a 50K loan with a 650 credit score? ›
For a loan of 50K, lenders usually want the borrower to have a minimum credit score of 650 but will sometimes consider a credit score of 600 or a bit lower. For a loan of 50K or more, a poor credit score is anything below 600 and you might find it difficult to get an unsecured personal loan.
Can paying off collections raise your credit score? ›
And if you have multiple debt collections on your credit report, paying off a single collections account may not significantly raise your credit scores. But if you have a recent debt collection and it's the only negative item on your credit report, paying it off could have a positive effect on your score.
Why is my FICO score so much higher than Credit Karma? ›
Some lenders report to all three major credit bureaus, but others report to only one or two. Because of this difference in reporting, each of the three credit bureaus may have slightly different credit report information for you and you may see different scores as a result.
Updating times. In addition to data differences, credit bureaus update their information at different intervals. For example, TransUnion may update its information every 30 days, whereas Experian may update information every 60 days. That time difference can lead to different scores.
What would the monthly payment be on a $350 000 house? ›
On a $350,000, 30-year mortgage with a 3% APR, you can expect a monthly payment of $1,264.81, not including taxes and interest (these vary by location and property, so they can't be calculated without more detail).
How to get approved for a 300k home loan? ›
8 Tips To Help You Get Approved For A Higher Mortgage Loan
- Improve Your Credit Score.
- Generate More Income.
- Pay Off Debts.
- Find A Different Lender.
- Make A Down Payment Of 20%
- Apply For A Longer Loan Term.
- Find A Co-Signer.
- Find A More Affordable Property.
The primary factor is your income — a $400,000 purchase typically requires a salary of at least $106,000. Other important considerations include your credit score, the size of your down payment and the details of your mortgage loan, including the interest rate.
How much can I borrow for a house with a 700 credit score? ›
You can borrow $50,000 - $100,000+ with a 700 credit score. The exact amount of money you will get depends on other factors besides your credit score, such as your income, your employment status, the type of loan you get, and even the lender.
How much house can I afford if I make $70,000 a year? ›
If you're an aspiring homeowner, you may be asking yourself, “I make $70,000 a year: how much house can I afford?” If you make $70K a year, you can likely afford a home between $290,000 and $360,000*. That's a monthly house payment between $2,000 and $2,500 a month, depending on your personal finances.
How much is a 200K mortgage per month? ›
On a $200,000, 30-year mortgage with a 4% fixed interest rate, your monthly payment would come out to $954.83 — not including taxes or insurance. But these can vary greatly depending on your insurance policy, loan type, down payment size, and more.
How much income is needed for a 300k mortgage? ›
You need to make $111,009 a year to afford a 300k mortgage. We base the income you need on a 300k mortgage on a payment that is 24% of your monthly income. In your case, your monthly income should be about $9,251. The monthly payment on a 300k mortgage is $2,220.
How much is a downpayment on a 200k house? ›
Conventional mortgages, like the traditional 30-year fixed rate mortgage, usually require at least a 5% down payment. If you're buying a home for $200,000, in this case, you'll need $10,000 to secure a home loan.
Can I afford a 500k house on 100K salary? ›
A 100K salary means you can afford a $350,000 to $500,000 house, assuming you stick with the 28% rule that most experts recommend. This would mean you would spend around $2,300 per month on your house and have a down payment of 5% to 20%.
The principal and interest payments would total $5,582 per month, and with taxes and insurance, that number comes out to $7,015. By making sure only 30% of income is being allocated toward that amount, a person would have to make $280,625, Jones said.
How much house can I afford if I make $36,000 a year? ›
For example, if you make $3,000 a month ($36,000 a year), you can afford a mortgage with a monthly payment no higher than $1,080 ($3,000 x 0.36). Your total household expense should not exceed $1,290 a month ($3,000 x 0.43). How much house can I afford with an FHA loan?
How much do you need to make to buy a $900 000 house? ›
A $900,000 home, with a 5% interest rate for 30 years and $45,000 (5%) down requires an annual income of $218,403.
What credit score is needed to buy a house with no money down? ›
What credit score do I need to buy a house with no money down? No-down-payment lenders usually set 620 as the lowest credit score to buy a house. You can boost your credit score by keeping your revolving charge card balances to a minimum and paying all your bills on time.
