Optimal Credit Score for Buying a House

When it comes to getting a mortgage to buy a house, your credit score will play a large role in determining whether you can get a mortgage, and if so, how favorable the terms will be for you. At an abstract level, the optimal credit score for buying a house is the one that allows you to buy the home you want in a manner that you can afford.

At a more tangible level, 580 is the minimum credit score one can have in order to get a low down payment loan from the Federal Housing Administration (FHA). Mortgage scores below 620 are considered subprime. These mortgages will require higher down payments, mortgage insurance, and will likely charge higher interest rates. A credit score above 670 is eligible to be financed in the prime mortgage market.

Higher scores offer home buyers better terms. However, at a certain point, a higher credit score may become less relevant than other factors. For example, a certain lender may require a down payment of 20% and a credit score of at least 720 to get the best possible terms and interest rate on a home mortgage. Under these circumstances, a credit score higher than 720 offers no advantage. However, the same lender may also offer its best possible mortgage rates to those with a 10% down payment and a 760 credit score. In this case, the optimal credit score would be 760. Finally, valued customers of a particular financial institution might get the best possible mortgage with just 2% down and a 680 credit score, particularly if they hold a large amount of assets at the bank. So it really depends on the lender.

Most online mortgage searches and applications have a top tier of credit score above which there is no amount that changes the available mortgages. For example, the Bankrate mortgage search engine simply allows for 740+ as the highest credit score entry. 

If you’re thinking about buying a house and your credit score could use a little help, reach out to the experts at Key Credit Repair today to request a free consultation!