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What's a Good Credit Score for First-Time Home Buyers?

By Ben Shepardson | January 30, 2023

Are you in the market for a house? If so, you may be one of the 4.5 million people looking for a home in 2023.

However, being a first-time home buyer can be extremely stressful. You may be trying to figure out the type of credit score you need to get a loan, how much you were able to spend based on the down payment, and getting everything else ready to move.

We want to help you solve one of those problems with this article. If you are wondering what a good credit score is, keep reading. We will walk you through the type of homebuying credit score you need for this process!

What Is a Credit Score?

Simply put, a credit score predicts your credit behavior based on your past behavior. A credit score is projected to determine how likely you are to pay a loan back on time. This can impact you a lot in your life.

A credit score is used to make decisions on whether to offer people mortgages, loans, auto loans, credit cards, and other credit products. Credit scores can also be used to screen tenants when applying for apartment rentals.

How Is This Calculated?

A credit score can be calculated on multiple factors. They will look at the following:

  • Applications for credit cards in the past
  • How long you've had a loan account open (and the number of loan accounts you have open)
  • The type of loan account you have
  • Current unpaid debt and credit-to-debt ratio
  • Your bill-paying history on your credit cards

When you see your credit score, one of the 3 major credit score services has created that number. This could be Equifax, Experian, or TransUnion.

All of the information on your credit cards will be reported to one of these three major credit bureaus. That is how they can provide a credit score to you.

The good news is, a credit card score is constantly changing. This is based on the deck you were paying off, the payments you're making, and the behavior you are displaying. If you want to get a better credit score, you simply have to start limiting your loans and paying off debt.

What Is a Good Credit Score?

A fair credit score ranges between 580 to 669. If you want to have a good credit score, you will want to see a 670 to a 739. Anything over 740 is a very good score.

However, depending on what you were trying to do, a "good" credit score can differ.

Loans and Credit Score

There are multiple different types of loans that you can take out as a first-time home buyer. Let's walk through a few of them and the type of credit score you need for each.

Conventional Loan

The most common type of home loan is a conventional loan. They are the most common because of their low rates and the simple approval process.

There is a hard minimum credit score of 620 to get a conventional loan to buy a house!

If this is the route you would like to go, you can get conventional loans through mortgage lenders, brokers, and credit unions.

So what do you need to qualify for this type of loan?

  • A credit score of 620 with your credit history
  • Required documents stated by the lender
  • Current credit score
  • Mortgage application

FHA Loan

FHA mortgage stands for the Federal Housing Administration mortgage. This was the original type of mortgage loan for homes. It came about in the 1930s.

FHA mortgages stand out because of their relaxed down payment requirements. They also don't charge an interest rate based on your credit score. This can be beneficial for those that have a lower credit score.

Federal Housing Administration mortgages do not require a credit score. However, some lenders will require a credit score of 580 or above.

So what do you need if you do not need to have a credit score?

This loan requires a 3.5% down payment and a loan length of over 15 years to qualify.

VA Loan

VA loans are given out by the Department of Veteran Affairs. These are affordable home loans that are available for service members and veterans alike.

To qualify for this loan, you have to have a certificate of eligibility.

VA loans are offered and available as 100% mortgage loans. They have lower interest rates compared to conventional loans.

Jumbo Loans

Jumbo loans are for homebuyers who are trying to buy a home with a loan that is too large for the local mortgage loan limit. Before you go this route, you need to ensure that you have a down payment of 5% to 25% of the home price.

Jumbo loans typically require a higher credit score because they are larger loans. However, there is no specific credit score limit for this type of loan.

Home Buying Credit Score

If you are a first-time home buyer, you need to ensure that you have the right home-buying credit score. This will better your odds of getting the loan.

However, many different loan options do not require a minimum credit score. Additionally, there is no right answer for what type of loan you decide to get. Whether you get a VA loan or a conventional loan is up to you and your financial situation.

If you enjoyed learning about credit scores and what you need for a home, we have a lot of helpful articles. Be sure to check them out!

Ben Shepardson is a Realty Biz News Contributing Writer and has a long track record of success in online marketing and web development. While pursuing a bachelor’s degree in Computer Information Systems, he worked doing enterprise-level SEO and started an online business offering web development services to small business customers.
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