A borrower’s credit score often plays a significant role in determining loan type, amount, and terms. Here’s what you need to know.

Minimum Credit Scores

How low can a credit score go for mortgage loan approval? There’s no one answer to that, as credit score requirements vary by loan type and the borrower’s financial situation. The minimum credit score range can be from 500 to 700.

The credit bureau Experian has guidelines on minimum credit scores by loan type. They are: FHA loans: 500; VA loans: 620; Conventional loans: 620; and Jumbo loans: 700.

Average Credit Scores by Loan Type

As of January 2025, Experian data shows among U.S. home loan borrowers, the average FICO score is 727. Within this group, the average credit scores by loan type are:

  • Conventional loan: 738. Borrowers who qualify for conventional or conforming programs often put down around 10%.
  • FHA loan: 645. With lower down payment requirements, FHA loans often serve borrowers with credit scores under 700.
  • VA loan: 692. Veterans and active-duty service members can qualify for VA loans with attractive interest rates and low or no down payments.
  • Jumbo loan: 768. Exceeding the loan limit set by Fannie Mae and Freddie Mac, Jumbo loans cater to people with some of the highest credit scores among all borrowers.

Credit Scores and Interest Rates

While credit score is one of several factors determining interest rate, there is a rule of thumb: the higher the credit score, the lower the interest rate.

In July 2024, the credit monitoring service myFICO took a snapshot of average interest rates for mortgage loans by FICO score ranges. These rounded averages are: 620 to 639: 7.8%; 640 to 659: 7.2%; 660 to 679: 6.8%; 680 to 699: 6.6%; 700 to 759: 6.4%; and 760 to 850: 6.2%.

Other Financial Factors

Beyond credit score, lenders usually consider a borrower’s debt-to-income ratio (DTI), and a DTI below 43% is often preferable. Work history can play a part; borrowers with steady salaried positions may get better loan terms. A higher down payment may offset a lower credit score, while significant assets could work to the borrower’s favor.

Improving Your Credit Score

It’s possible to improve your credit score fast. You can check your score for inaccuracies and correct them. Strategic credit card payments, increasing credit limits, and becoming an authorized user on the credit card of a friend or relative can raise your credit score.

To know more about how your credit score relates to buying your dream home, contact a member of the First United team at (972) 591-3097 or connect with us online.