If you're thinking about buying a home, one of the most important factors lenders will consider is your credit score. Your credit score affects not only your ability to qualify for a mortgage but also the interest rate you'll receive—potentially saving (or costing) you thousands of dollars over time. So, what credit score do you need to secure a mortgage, and how can you improve it before buying? Let’s break it down.

Why your credit score matters to lenders

Your credit score helps lenders determine your ability to repay the mortgage — and, subsequently, their risk in extending you the loan. The higher your score, the less risk you present.

When considering the best credit score to buy a house, many lenders use the FICO model. It grades consumers on a 300 to 850 point range, with a higher score indicating less risk to the lender. FICO scores range as follows:

• 800 or higher: Exceptional
• 740-799: Very good
• 670-739: Good
• 580-669: Fair
• 579 or lower: Poor

Minimum Credit Scores for Different Loan Types

The minimum credit score required varies based on the type of loan you’re applying for. Here’s a quick guide:

• Conventional Loan: Typically requires a 620+ credit score. These loans are not backed by the government, so lenders set stricter requirements.
• FHA Loan: Allows scores as low as 500-580 with a higher down payment. A score of 580+ qualifies you for the minimum 3.5% down payment, but lower scores may require at least 10% down.
• VA Loan (for veterans and active military): No official minimum credit score, but most lenders look for at least 620. VA loans offer competitive interest rates and no down payment requirements.
• USDA Loan (for eligible rural homebuyers): Typically requires a 640+ score to qualify for no down payment financing.

Why Your Debt-to-Income Ratio (DTI) Matters

While your credit score is crucial, lenders also evaluate your Debt-to-Income Ratio (DTI) to determine if you can afford a mortgage.

What is DTI?

Your DTI is the percentage of your monthly income that goes toward paying debts (including credit cards, car loans, student loans, and potential mortgage payments).

Most lenders prefer a DTI of 36% or lower, though some government-backed loans allow higher ratios with compensating factors.

How to Calculate Your DTI

Add up all your monthly debt payments (including projected mortgage, credit cards, loans, etc.).
Divide that number by your gross monthly income (before taxes).
Multiply by 100 to get your percentage.

Example: If you earn $6,000 per month and have $2,000 in monthly debt payments, your DTI is 33% ($2,000 ÷ $6,000 = 0.33 or 33%).

How to Improve Your DTI

- Pay down existing debt before applying for a mortgage.
- Avoid taking on new debt (like car loans or personal loans).
- Increase your income (if possible) to lower your DTI ratio.

How Your Credit Score Impacts Your Mortgage Rate

Even if you meet the minimum credit score requirement, a higher score can save you money in the long run. Mortgage lenders use your score to determine your interest rate. For example, a borrower with a 760+ credit score may qualify for a much lower interest rate than someone with a 620 score—potentially saving thousands over the life of the loan.

How to Improve Your Credit Score Before Buying

If your score needs a boost before applying for a mortgage, here are some key steps:

? Pay bills on time – Late payments can lower your score.
? Reduce credit card balances – Aim to keep credit utilization under 30%.
? Avoid new credit inquiries – Applying for new loans or credit cards can temporarily lower your score.
? Check your credit report – Look for errors and dispute inaccuracies.

The Bottom Line

Your credit score plays a significant role in the home-buying process, affecting your mortgage approval, interest rate, and monthly payments. If you're considering buying a home soon, take steps now to improve your credit score and position yourself for the best financing options.

Curious about your homebuying potential? Contact BELL Home Team today to explore your options and start your journey toward homeownership!