What Credit Score Is Needed to Get a Home Loan?

It's possible to buy a house even with a very low credit score.

Mortgage lenders set their own individual standards for approving home loans, but generally you will need a credit score of at least 500 to be approved for a loan.

Types

Loans insured by the Federal Housing Administration are a favorite of borrowers with low credit scores. The FHA insures the loan, removing much of the risk for lenders. The Washington Post reported in 2010 that the FHA was insuring loans with credit scores as low as 500.

Considerations

Generally, borrowers with the highest credit scores receive the lowest interest rates. The credit website BCS Alliance says a credit score of around 660 is generally needed for a non-FHA loan, with scores of 700-plus necessary for the lowest rates.

Significance

Higher interest rates caused by low credit scores can cost you thousands of dollars in finance charges over the life of the loan. BCS Alliance says an interest rate that is just two points higher than the next lowest available rate could cost you an additional $72,000 over the life of a 30-year, $172,000 loan.

References

• BCS Alliance: Mortgages and Credit Scores
• The Washington Post: FHA Balancing Act