What is the credit score needed to buy a home in 2020?

Credit lines typically range from 300 to 850, and lenders within a certain range may be eligible for mortgage loans. While you do not need a perfect 850 credit score to get the best mortgage rates, there are general credit score requirements that you must meet to take out a mortgage.

Suggested home buyers should aim to have credit scores of 760 or higher to be eligible for the best interest rates on mortgages.

However, the requirements for minimum credit score differ based on the type of loan you are taking out and who is insuring the loan. From the list below, conventional and jumbo loans are unsecured by the government and often have higher credit score requirements compared to government-backed loans, such as VA loans.

Having a higher credit score makes a big difference in the amount of money you pay off in the course of a loan. Lenders with scores in the higher range can save thousands of dollars in interest payments over the life of a mortgage.

Here are the minimum credit score requirements for various mortgage lenders, with FICO estimates.

Minimum credit score required: 620

Conventional mortgage loans are not insured by a government agency, such as the U.S. Department of Veterans Affairs or the U.S. Department of Agriculture. Instead, these loans follow standards set by government-sponsored mortgage lenders, Fannie Mae and Freddie Mac. Conventional loans can be secured by one of these companies or by a private loan. These loans are more affordable and require a minimum score of 620 credits. Payment amounts vary.

Conventional loans are divided into conforming or non-conforming loans, based on whether they “conform” or follow loan rules set by Fannie Mae and Freddie Mac. Compliant loans follow the standards set by these organizations, such as maximum loan amounts, although non-compliant loans can cross these limits and be considered “jumbo” loans, which we discuss the credit requirements for next.

Minimum credit score required: 680

A jumbo loan is greater than the maximum loan limit set by the Federal Housing Finance Agency. These loans can not be secured by Fannie Mae or Freddie Mac, which means that lenders take more risk in case you have default payments. Due to the larger loan amounts and the riskier nature of these loans, lenders have to meet higher credit score requirements of at least 680. As compliant loans meet, fees vary.

Minimum credit score required: 500 (by 10% down) or 580 (by 3.5% down)

An FHA loan is secured by the Federal Housing Administration and an option for lenders who are considered at a higher risk due to low credit score and not much money to put into a lump sum. Credit score requirements vary based on how much money you plan to deposit. Lenders with higher credit scores may qualify to make a lower down payment.

Here is the breakdown:

• Minimum 500 credit score, 10% refund required
• Minimum 580 credit score, 3.5% deposit required

Keep in mind that if you pay a deposit less than 20%, lenders will likely require you to take out primary mortgage insurance (PMI) to cover the cost if you default. PMI can cost as low as 0.5% to up 2% of your loan amount annually, according to Experian.

Minimum credit score required: Not officially, though many lenders prefer 620

A VA (Veteran Affairs) loan is insured by the U.S. Department of Veterans Affairs and is designed to qualify members of the military community and their spouses. This type of loan does not require a down payment. And while the VA does not set credit scores, most lenders will have a minimum credit score of 620.

Minimum credit score required: Not officially, though most lenders prefer 640

A USDA loan is secured by the U.S. Department of Agriculture and is intended for low- to moderate-income buyers. Similar to a VA loan, the USDA does not require a down payment and does not set a minimum credit score requirement. However, most lenders will require lenders to have a credit score of 640 or higher.