Can I Buy a House With a 700 Credit Score?

househunt

A 700 credit score meets the minimum requirements for most mortgage lenders, so it's possible to purchase a house when you're in that range.

However, lenders look at more than just your credit score to determine your eligibility, so having a 700 credit score won't guarantee approval. A credit score of 700 also might not qualify you for the best interest rate on your mortgage loan, you may still want to work on improving your credit scores to save on interest.

Here's what you need to know about the credit requirements for a mortgage loan.

Is 700 a Good Credit Score?

FICO Scores fall within a range of 300 to 850, with the range that's considered "good" starting at 670. Beyond that, your FICO® Score is considered very good if it's 740 or higher and exceptional at 800 or above.

Your credit score provides a snapshot of your overall credit health, so a higher credit score is an indicator that you've responsibly managed your credit in the past. As a result, the higher your credit score is, the less risky you'll appear as a borrower and the more confidence lenders will have that you'll repay your debts as agreed.

Score Ranges

What Credit Score Do You Need to Buy a House?

The minimum credit score required for a mortgage loan can vary based on the type of loan and the lender offering it. That said, here's a general idea of what you can expect with different types of mortgage loans:

  • Conventional loans: The most popular loan type typically comes with a 620 minimum credit score.
  • Jumbo loans: These loans exceed the maximum amount for conforming loans, jumbo loans typically have a higher credit score requirement at 680 or above.
  • Federal Housing Administration (FHA) loans: With a 3.5% down payment, homebuyers may be able to get an FHA loan with a 580 credit score or higher. If you can manage a 10% down payment, though, that minimum goes as low as 500.
  • U.S. Department of Veterans Affairs (VA) loans: VA loans don't technically have a minimum credit score, but lenders will typically require between 580 and 620.
  • U.S. Department of Agriculture (USDA) loans: In general, lenders require a minimum credit score of 640 for a USDA loan, though some may go as low as 580.

Remember, though, that while meeting the minimum credit score requirement is crucial, it doesn't guarantee that you'll be approved for a mortgage loan. Lenders review several aspects of your financial situation to determine whether you qualify for a loan and what your interest rate will be.

What Do Mortgage Lenders Consider When Determining Your Interest Rate?

A mortgage loan is a major financial commitment, both for you and your lender. As such, mortgage lenders look at many different factors during the underwriting process to determine your eligibility and, if approved, your interest rate.

  • Credit score: Again, your credit score is an important indicator of how you've managed credit in the past, and how a lender can expect you to manage your debt payments in the future. The higher your credit score, the better your chances of getting approved and scoring a lower interest rate.
  • Down payment: A down payment reduces some of the risk associated with lending because you're borrowing less money. Most lenders have a minimum down payment requirement, but the more money you put down, the higher your chances of getting a reduced rate.
  • Debt-to-income ratio: Your debt-to-income ratio (DTI), or the percentage of your monthly income that goes toward debt payments, shows how much flexibility you have to take on another debt payment. If it's too high—lenders prefer 36% or less, but some may allow for higher—it could make it difficult to get approved. And the lower your DTI, the less of a risk you pose to the lender, which can result in a lower interest rate.
  • Loan term and loan size: Higher loan amounts and longer repayment terms present more risk to lenders, so they may be associated with higher interest rates. But if you reduce your loan amount by making a large down payment or buying a cheaper home and choose a 15-year mortgage over a 30-year mortgage, it could help you qualify for a lower rate.
  • Loan type: Government-backed loans typically allow for lower credit scores because they're at least partially insured by a government agency if you default. However, the trade-off is that they may end up costing you more in the form of mortgage insurance and other fees, which can impact your loan's annual percentage rate (APR).
  • Home location: The cost of doing business and competition can vary by state and even by city. As a result, some regions may naturally come with lower mortgage rates than others, even if you're working with a national lender.

These are just a few of the factors that go into the underwriting process. Lenders may also consider your type of employment (self-employed versus working for a company), other debts and information on your credit reports, recent credit applications, cash reserves and more.

Check Your Credit Before Applying For a Mortgage

Mortgage lenders take an extremely close look at your credit reports before accepting your mortgage application, so it's essential that you know what's on them and how they might impact your chances of getting approved with favorable terms.

More specifically, mortgage lenders will look for the following things:

  • Payment history, including past-due payments, defaults and collection accounts
  • Past foreclosures, repossessions and bankruptcies
  • Authorized user accounts versus accounts where you're the primary cardholder
  • Credit utilization (how much of your available credit on credit cards you're currently using)
  • Recent credit applications
  • Disputes

If you're thinking of buying a home soon, it's a good idea to start checking your credit report at least three months before you apply. This will give you enough time to look for your risk factors and any red flags that could keep you from getting the financing you need.

How to Improve Your Credit Score Before Applying for a Mortgage

Even if your credit score is high enough to meet the minimum requirements, it's still wise to work on improving your credit score before applying for a mortgage loan.

To start, check your credit report and credit score to see where you stand. Both can give you an idea of which areas could impact your chances of getting approved and how to address them.

Other ways to get your credit ready for a mortgage include:

  • Stop applying for new credit.
  • Limit large purchases on your credit cards.
  • Pay down credit card debt to reduce your credit utilization rate.
  • Make sure you pay your bills on time and get caught up on any past-due payments and collection accounts.
  • Avoid closing old credit card accounts.
  • Search for and dispute inaccurate information on your credit reports.

Some of these steps can take some time to start reflecting on your credit score. But if it means shaving even a fraction of a percentage point off your interest rate, making the effort can save you thousands of dollars over the life of your loan.

Keep Up the Good Work During the Mortgage Process

Mortgage lenders typically run a credit check when you first apply for a loan, then again shortly before closing. Because of this, it's critical that you continue to monitor your credit and practice good credit habits during the mortgage process.

The last thing you want is to get approved upfront, find a house then have to back out because a new credit application or a missed payment spooks the lender.

But as you continue to practice good credit habits during the mortgage process, it can help ensure you get into the house you want with favorable financing terms.

How Good Is Your Credit Score?

300 credit score301 credit score302 credit score303 credit score304 credit score305 credit score306 credit score307 credit score308 credit score309 credit score310 credit score311 credit score312 credit score313 credit score314 credit score315 credit score316 credit score317 credit score318 credit score319 credit score320 credit score321 credit score322 credit score323 credit score324 credit score325 credit score326 credit score327 credit score328 credit score329 credit score330 credit score331 credit score332 credit score333 credit score334 credit score335 credit score336 credit score337 credit score338 credit score339 credit score340 credit score341 credit score342 credit score343 credit score344 credit score345 credit score346 credit score347 credit score348 credit score349 credit score350 credit score351 credit score352 credit score353 credit score354 credit score355 credit score356 credit score357 credit score358 credit score359 credit score360 credit score361 credit score362 credit score363 credit score364 credit score365 credit score366 credit score367 credit score368 credit score369 credit score370 credit score371 credit score372 credit score373 credit score374 credit score375 credit score376 credit score377 credit score378 credit score379 credit score380 credit score381 credit score382 credit score383 credit score384 credit score385 credit score386 credit score387 credit score388 credit score389 credit score390 credit score391 credit score392 credit score393 credit score394 credit score395 credit score396 credit score397 credit score398 credit score399 credit score400 credit score401 credit score402 credit score403 credit score404 credit score405 credit score406 credit score407 credit score408 credit score409 credit score410 credit score411 credit score412 credit score413 credit score414 credit score415 credit score416 credit score417 credit score418 credit score419 credit score420 credit score421 credit score422 credit score423 credit score424 credit score425 credit score426 credit score427 credit score428 credit score429 credit score430 credit score431 credit score432 credit score433 credit score434 credit score435 credit score436 credit score437 credit score438 credit score439 credit score440 credit score441 credit score442 credit score443 credit score444 credit score445 credit score446 credit score447 credit score448 credit score449 credit score450 credit score451 credit score452 credit score453 credit score454 credit score455 credit score456 credit score457 credit score458 credit score459 credit score460 credit score461 credit score462 credit score463 credit score464 credit score465 credit score466 credit score467 credit score468 credit score469 credit score470 credit score471 credit score472 credit score473 credit score474 credit score475 credit score476 credit score477 credit score478 credit score479 credit score480 credit score481 credit score482 credit score483 credit score484 credit score485 credit score486 credit score487 credit score488 credit score489 credit score490 credit score491 credit score492 credit score493 credit score494 credit score495 credit score496 credit score497 credit score498 credit score499 credit score500 credit score501 credit score502 credit score503 credit score504 credit score505 credit score506 credit score507 credit score508 credit score509 credit score510 credit score511 credit score512 credit score513 credit score514 credit score515 credit score516 credit score517 credit score518 credit score519 credit score520 credit score521 credit score522 credit score523 credit score524 credit score525 credit score526 credit score527 credit score528 credit score529 credit score530 credit score531 credit score532 credit score533 credit score534 credit score535 credit score536 credit score537 credit score538 credit score539 credit score540 credit score541 credit score542 credit score543 credit score544 credit score545 credit score546 credit score547 credit score548 credit score549 credit score550 credit score551 credit score552 credit score553 credit score554 credit score555 credit score556 credit score557 credit score558 credit score559 credit score560 credit score561 credit score562 credit score563 credit score564 credit score565 credit score566 credit score567 credit score568 credit score569 credit score570 credit score571 credit score572 credit score573 credit score574 credit score575 credit score576 credit score577 credit score578 credit score579 credit score