You don’t need an 800 credit score to buy a house. That’s one of the most common myths I hear from first-time buyers, and it keeps a lot of people renting longer than they need to. The credit score to buy a house is lower than most people think. Here’s the number that matters, and what to do about yours.
The minimum credit score to buy a house with FHA
Under HUD’s FHA rules, a borrower with a credit score of 580 or higher can qualify for maximum financing, which means a 3.5% down payment. Scores from 500 to 579 can still be eligible with 10% down. (Source: HUD Single Family Housing Policy Handbook 4000.1.)
One catch: those are the program’s minimums. Many lenders set their own higher floor, called an overlay. If one lender says no, another may say yes, so it pays to shop around.
Why your score still matters
Qualifying is one thing. What you pay is another. A higher score can mean a lower interest rate and cheaper mortgage insurance, and over 30 years that adds up.
Think of it like a report card. You don’t need straight A’s to graduate, but better grades open more doors. I’ve graded enough papers to know.
If you’re weighing how much to put down, my lesson on why 20% down matters (and when it doesn’t) explains how mortgage insurance works.
Three ways to improve your credit score to buy a house
- Pull your credit reports and fix errors. You can get your reports free at AnnualCreditReport.com, the site federal law set up for free reports. The CFPB explains how to dispute mistakes.
- Pay credit card balances down before you apply. High balances compared to your limits can drag your score down, even when you pay on time every month.
- Don’t open new credit during the loan process. No new car, no new furniture on a store card. New debt can change your numbers right before closing. Wait until after you have the keys.
Talk to a lender early
Even if you’re a year away from buying, a lender can pull your credit, tell you where you stand and give you a short list of what to work on. That conversation is free and it turns a vague worry into a plan.
While you’re getting ready, look at the other costs too. My first-home cost guide walks through every check you’ll write in North Carolina, and NC first-time homebuyer programs may help with your down payment. Programs have their own credit score requirements, so ask about those as well.
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General information, not legal, tax or lending advice. A broker’s opinion of value is not an appraisal.
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Mike Hall, The Triangle Real Estate Professor, is a broker with First Flight Realty in Cary, NC, and an NCREC-approved real estate instructor.
