How Your Credit Score Can Determine Your Mortgage

A credit score is arguably the single most important factor for lenders when determining whether you qualify for a mortgage or not. Not only that, but your credit score will also determine what type of loan you can get when finding financing for your next home purchase.

The score is important to lenders because it shows them how responsible you are with your finances and reveals your credit repaying history. When it comes to your credit score, the higher it is, generally the better your mortgage rate and closing costs will be. Lower scores often result in higher payments, higher mortgage insurance and more closing costs.

Lenders will consult with Transunion, Equifax and Experian and pull each score with the three bureaus. When a lender determines your qualifying score, they will take the middle of the three scores. For example, if a borrower has credit scores of 680, 720 and 725, the 720 will be the qualifying score.

Each loan program has its own requirements for minimum credit scores. Every borrower’s financial situation is different, that is why it is important to know which programs require certain scores, so you will know which loan is best for you.


Conventional loans are loans issued and backed by Fannie Mae or Freddie Mac which are government sponsored entities. These loans are typically utilized by borrowers with good credit. They are typically one of the hardest loans to qualify for and set their minimum score requirement at 620.

The loan is best suited for those with enough capital to make a larger down payment. In doing so, these loans come with some of the best rates and lowest mortgage insurance cost in the industry.


VA loans are back by the Department of Veteran Affairs and are solely for veterans of the Armed Forces, current service members or their spouses. The VA does not set a minimum credit score requirement, however most lenders want to see that a borrower has at least a 580-credit score.

These loans are attractive for their selective borrowers as they often feature lower interest rates and do not require a down payment to qualify.


Similar to VA loans, USDA loans are backed by a government entity and allows for a zero percent down payment. These loans also do not require a minimum credit score. Most lenders will want to see a 640 score to utilize this loan program.

Borrowers should also be aware that this program has an income limit and the financed properties must be within a given USDA area to be eligible for the program.


Perhaps one of the most popular loans on the market today, an FHA loan allows for the most relaxed credit score qualifications. The minimum score to get an FHA loan is 550. Borrower with scores between 550 and 579 are required to put 20 percent down while those with scores north of 580 only have to put 3.5 percent towards the purchase price.

FHA loans also feature an upfront mortgage insurance premium and monthly MIP. The higher your score, the better the rate and mortgage insurance payment will be.

Bottom Line

Credit scores will determine the loan in which you qualify, your interest rate and your down payment amount. Knowing your score is vital when planning to purchase a home. There are many free apps you can download to get a better understanding of your credit report and scores.

Consumers are allowed to pull one free report per year from from each of the three main credit bureaus. While these reports will not show you your score, they will provide you with your credit information so you can check for accuracy and potentially plan to increase your credit scores.

Related Reading: Comparing FHA, VA, Conventional, Jumbo and USDA Loans

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