Mortgages & Minimum Credit Scores

Mortgage lenders are approving more mortgage loans than during any period this decade.

In part, this is because lenders have created more programs with more flexible underwriting guidelines. That includes Fannie Mae’s Homeready and some “non-prime” offerings from portfolio lenders as well.

So, what’s the minimum credit score required to get a mortgage approved?

Ask a group of lenders and you’ll get answers across a wide range of the credit scoring spectrum — which is unhelpful, of course. Without “one minimum score”, you can’t know whether you’ll be approved until you go for pre-approval.

With FICO scores ranging from 350-850, what score do you exactly need?

It depends.

Credit Scores

As a mortgage borrower in the United States, there is no shortage of mortgage loans available to you.

Loans backed by the Federal Housing Administration (FHA) and Fannie Mae and Freddie Mac allow down payments as low as 3.5 percent and three percent, respectively.

And, VA loans from the Department of Veterans Affairs and USDA-backed Rural Housing Loans both allow no money down.

In today’s housing market, the minimum FICOs are lenient.

  • Fannie Mae and Freddie Mac: 620 minimum FICO score
  • FHA loan: 500 minimum FICO score
  • VA loan: No minimum FICO score
  • USDA Rural Housing: No minimum FICO score

There’s more to know than just the minimums, of course (which is why underwriting guidelines comprise hundreds of pages). In addition to credit scores, lenders evaluate borrowers based on down payment, income, savings, and debt loads, too.

If that seems like a lot of information, that’s because it is.

Automated Underwriting

It’s so much information that mortgage lenders use automated underwriting software (AUS) to make an approval recommendation.

In general, AUS findings work like this:

  • High credit scores with strong income, assets, and debt get approved
  • Low credit scores with weak income, assets, and debt get turned down

Applicants with mixed profiles are the least-predictable and most interesting.

If your credit scores are weak but you have high, stable income; a large amount of savings, and a manageable load of debt, you’re likely to get approved via AUS.

Similarly, you’re likely to be approved if your credit scores are strong but you’re average in the supporting zones.

You don’t have to be great in all areas to secure an approval. The key is to understand that lenders don’t treat “low credit scores” in the same way that they treat “bad credit”.

Your FICO Score Doesn’t Tell The Whole Story

620 is the minimum FICO score for a conventional home loan, and that’s widely considered to be a below-average score.

However, POST

Low credit scores can happen for a lot of reasons. Maybe you prefer paying cash over using credit, or, maybe you’re too young to have a credit history, or maybe you carry high balances.

A “respectable” credit history can get you approved.

Bad credit, though, is different.

Characterized by collections, write-offs, and late and missed payments, “bad credit” will get your loan denied — especially when lenders begin to apply their overlays.


A mortgage overlay is an additional mortgage guideline imposed by a lender, which goes beyond the loan’s official minimum standard.

For example, Fannie Mae allows the financing of more than four properties via a program called the 5-10 Properties Program.

However, because this loan is a challenge to underwrite, many mortgage lender put an overlay in place which disallows financing a fifth property in a portfolio.


A recent study from Fannie Mae found that nearly two-thirds of mortgage lenders apply mortgage overlays. The most common overlay related to credit scores.

47 percent of lenders applied overlays to the minimum credit score requirements of a mortgage loan. Your 500 FICO score, therefore, may not get you FHA-approved, even if the FHA allows it.

This is why it’s smart to re-apply for a mortgage if you’ve recently been denied. Your loan may have been turned down, but that could be because of an overlay.

Apply at a different bank, you may get different results.


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