What's the Lowest Credit Score You Can Have to Purchase a Home?

If you have a credit score of 500 or lower, your best chance of getting a home loan is through the Federal Housing Administration (FHA). FHA loans require a minimum FICO score of 580, but with a score of 500 to 579, you'll need to make a 10% down payment. Your credit score helps lenders determine your ability to pay the mortgage and your risk. The credit score required to buy a home may vary depending on the type of loan you're applying for.

When you apply for pre-approval, lenders will review your credit history and consider your current credit outlook. Even if you have a credit score of 500, which is considered very poor by the FICO standard, you can still have the chance to own your dream home. It's important to work on your credit score before applying for a mortgage, but don't neglect other important areas of your financial situation. Conventional loans are usually better for those with good or excellent credit, since they require a higher credit score than government-insured loans.

If your credit score is in good standing, you may have several different types of loans to choose from. Another option is to have a friend or family member buy the home, add it to the title, and then try refinancing in your name when your credit ratings improve enough. If you do this in a short period of time, all inquiries will be grouped into one, limiting the impact on your credit rating. You'll notice that if you have a credit rating of at least 640, you could get a smoother application experience.

FHA loans are more inclusive than other loan options because of their more relaxed down payment requirements and because FHA doesn't change your interest rate based on your credit score. Bankrate's loan comparison calculator is a useful tool to help you see interest rates on different credit scores. Having bad credit or no credit can mean you're unlikely to get a mortgage unless someone you know is willing to help. Once you understand this information, you can begin to increase your credit score positively or maintain it for the best chance of qualifying for a mortgage.

Jeffery Sheinbein
Jeffery Sheinbein

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