When it comes to mortgages and credit scores, there are two really important questions to ask:

  • What credit score do I need to qualify for a mortgage?
  • What credit score do I need to get the lowest interest rate on a mortgage?

These different, but related, questions are important if you are looking to buy a home. And the second question is particularly important. With a high FICO score, you can literally save tens of thousands of dollars in interest over the life of a home loan.

So, let’s take a look at both questions. And if you don’t know your score, be sure to get your free credit score with myFICO.

Related: How to Buy a Home With Imperfect Credit

What is a credit score?

As an initial matter, let’s briefly cover what a credit score is. A credit score is a three-digit number calculated based on information in your credit report. The most common credit score and the one used by mortgage lenders is called a FICO score.

The name FICO comes from the company that developed the scoring model, Fair Isaac Corporation. The FICO score considers five factors to calculate a credit score: Payment history, amounts owed, length of credit history, new credit, and types of credit. Each factor, however, is not treated equally. Payment history, for example, is more important than the types of credit used, as this graphic illustrates.

FICO scores range from a low of 300 to a high of 850. The higher your score, the better. Now on to credit scores and mortgages.

Learn More: A Rare Glimpse Inside the FICO Credit Score Formula

What credit score do you need to qualify for a mortgage?

The first thing to keep in mind is that qualifying for a mortgage involves a lot more than just a credit score. While your FICO score is a very important ingredient, it is just one factor. Mortgage lenders also look at a number of other factors, including an applicant’s:

  • income
  • level of debt
  • down payment
  • debt to income ratio
  • location of home
  • home price and loan amount
  • amount of savings

As a rule of thumb, however, a credit score below 620 will make buying a home very difficult with a conventional mortgage. A FICO score below 620 is considered sub-prime. In the past, there were mortgage companies that specialized in sub-prime mortgages. Because of the challenges in the credit market over the last year or so, however, sub-prime loans have become very difficult (if not impossible) to obtain.

Resource: Get access to your credit score for free at Experian when you sign up for Experian’s Score Tracker. You get a 7-day free trial.

A FICO score between 620 and 650 is considered fair to good credit. But keep in mind, that this range of credit scores does not guarantee you will qualify for a mortgage. Even if you do qualify, it won’t get you the lowest interest rate possible. Still, to buy a home, aim for a score of at least 620, recognizing that other factors weigh in the decision and that some banks may require a higher score.

With an FHA mortgage, however, a FICO score of 600 or higher is enough to qualify for the 3.5% down payment loan. FHA guidelines actually authorize this type of mortgage with a score of 580 or higher. Most banks, however, won’t approve such a loan at that credit score.

Until recently, banks required a score of at least 640. Earlier this year, Wells Fargo dropped its credit score requirement for FHA and VA loans to 600. Many other banks are following suit.

Related: Can You Put a Down Payment on a Credit Card?

What credit score do you need to get a low rate mortgage?

It used to be that a score of about 720 would yield the lowest mortgage rates available. Today, the best rates kick in with a FICO score of 760. And interest rates go up significantly as your credit score drops.

To give you an idea, the following table gives you an idea of current rates by credit score. It also calculates a monthly principal and interest payment, based on a $300,000 loan:

FICO Score APR Monthly Payment
760-850 4.042% $1,440
700-759 4.264% $1,478
680-699 4.441% $1,510
660-679 4.655% $1,548
640-659 5.085% $1,626
620-639 5.631% $1,728

Read More: Best Personal Loans for Fair Credit

Of course, the interest rates change daily, but the above table gives you an idea of the importance of a high score when you apply for a mortgage. From the top credit score range to the bottom is a difference of more than 1.5 percent. While that may not seem like a lot, it results in a higher payment of more than $250 per month.

And over the life of a 30-year mortgage, a top credit score of 760 or higher as compared to a score of 620 will save you about $102,000 in interest payments on a $300,000 mortgage!

Additional Resources:

Credit Karma offers a free credit monitoring service that makes it easy to access your scores and credit reports at any time.

Mortgage Rates: See today’s mortgage rates by state and for multiple types of loans.

11 Easy Ways to Improve Your Credit

Which FICO score do mortgage lenders use?

Credit Scores 101

5 Ways to Calculate How Much House You Can Afford

Listen to the Podcast Version of this Article


  • Rob Berger

    Rob Berger is the founder of Dough Roller and the Dough Roller Money Podcast. A former securities law attorney and Forbes deputy editor, Rob is the author of the book Retire Before Mom and Dad. He educates independent investors on his YouTube channel and at RobBerger.com.