A high credit score usually qualifies for a lower interest rate, but what’s the minimum score to get a loan at all? Buyers trying to boost their score should aim for 620 on a conventional loan and 580 (3.5% down) on an FHA loan. Lender requirements vary for jumbo or VA loans.

SAN JOSE, Calif. – Interest rates are at rock-bottom, and it’s a great time to buy a house if you can find one. But it’s also a tricky time to get a loan as some lenders worry about an uptick in foreclosures during a recession.

As a result, buyers should create a credit-score goal. If their score already qualifies for a loan, they should consider working toward a higher score so they can qualify for a lower interest rate, according to myFICO.com.

Typical minimum FICO credit score requirements

• Conventional loan: Minimum FICO score required – 620
  A conventional mortgage is a loan that Fannie Mae or Freddie Mac considers eligible for them to purchase, guarantee or securitize. Since the lender can sell the loan after closing, it makes them more affordable to borrowers. Conventional loans fall into two categories: conforming and non-conforming. A conforming loan is one in which the amount falls within the maximum limits of the two government agencies that back most mortgages. Loans that don’t fall within these limits are non-conforming but generally called “jumbo” loans.

• Jumbo loan: Minimum FICO score required – None (but 680 for most lenders)
  The size of a jumbo loan exceeds limits set by the Federal Housing Finance Agency (FHFA) for purchase by Fannie Mae or Freddie Mac. Lenders can keep these loans in their portfolio or sell them to other entities.

• FHA loan: Minimum FICO score required – 500 (10% down) or 580 (3.5% down)
  An FHA loan is for borrowers with limited down payment ability and whose credit history is higher risk. An FHA loan requires two mortgage insurance premiums: one is paid upfront, and the other is paid annually for the life of the loan if you put down less than 10%.

• VA loan: Minimum FICO score required – None (but 620 for most lenders)
  A VA (Veteran Affairs) loan is a zero-down-payment mortgage issued by private lenders and partially-backed or guaranteed by the Department of Veteran Affairs (VA). Eligible borrowers can use a VA loan to purchase property as their primary residence or refinance an existing mortgage.

How FICO scores influence mortgage interest rates

A higher credit score can make a big difference in the cost of a mortgage loan. Lenders usually look at a FICO score “range” when quoting mortgage rates to a buyer. With each point that bumps a buyer into a higher FICO credit score range, a mortgage’s interest rate goes down.

On July 9, 2020, for example, a Florida buyer with the lowest credit score range of 620-639 could expect to pay $1,021 each month to the bank (4.564% rate). But a buyer in the top 760-850 range would only pay $835 (2.922%).

An online calculator graphically displays different payments based on loan amounts, lengths and state of origin.

© 2020 Florida Realtors®

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