What Credit Score Do You Need to Buy a House?

Published On: March 18, 2025|Categories: Real Estate|

Your credit score plays a big role in your ability to buy a home. Whether you’re looking in Jasper, Evansville, or another part of Dubois County, your credit score helps determine if you qualify for a mortgage, what kind of loan you can get, and what interest rate you’ll pay.

This guide explains the following:

The minimum credit score required for different loan types
How your score affects interest rates and loan terms
What lenders consider besides your credit score
How to check and improve your credit
What to do if your score is too low

Here’s a closer look at each.

The Minimum Credit Score Required For Different Loan Types

Each type of mortgage has its own credit score requirements. Here’s a general breakdown:

Conventional loans – Most lenders require a score of 620 or higher
FHA loans – Minimum score of 580 with 3.5% down, or 500 with 10% down
VA loans – No official minimum, but most lenders prefer 580–620 or higher
USDA loans – Minimum credit score is typically 640

Keep in mind that even if you meet the minimum score, a higher score will get you better rates and terms. Your REALTOR® and lender can help you understand which loan is right for your situation based on your score and finances.

How Your Score Affects Interest Rates And Loan Terms

Your credit score doesn’t just decide whether you get approved—it also affects how much you’ll pay over the life of your loan.

Here’s how it works:

Higher scores = lower interest rates
Lower scores = higher rates and possibly more upfront fees

Even a small difference in your rate can cost you thousands over a 30-year loan. For example, someone with a score of 760+ might qualify for a rate of 6.5%, while a buyer with a 620 might get 7.5% or more.

If you’re buying in Huntingburg or Ferdinand, where every dollar counts, this difference can significantly affect your monthly payment and total interest paid.

What Lenders Consider Besides Your Credit Score

Your credit score is important, but it’s not the only thing lenders look at. They’ll also consider:

Debt-to-income ratio (DTI) – How much of your monthly income goes toward debt
Employment history – Stable, consistent income is key
Savings and assets – Lenders want to see that you have money for a down payment and closing costs
Credit history length and activity – A long, stable history of on-time payments looks better than a short or spotty record

This is why it’s possible to get approved with a lower credit score if your other financial factors are strong.

How To Check And Improve Your Credit

Before applying for a mortgage, check your credit for free at AnnualCreditReport.com, the only site authorized by the federal government. You’re entitled to one free report from each bureau every year.

To improve your score:

Pay bills on time, every time
Pay down credit card balances to lower your utilization
Don’t open or close major accounts right before applying
Dispute any errors on your report
Avoid new debt while shopping for a home

It may take a few months to see major changes, but even small improvements can help you qualify for better rates.

What To Do If Your Score Is Too Low

If your credit score is below the minimum for your desired loan, don’t panic. You have options:

Talk to a lender early – They can give you a personalized plan to raise your score
Explore credit counseling – Reputable non-profits can help with debt management
Consider waiting – If your score is close to qualifying, waiting a few months to improve it may be smarter than rushing in

There are also state resources that can help. Indiana offers several programs to support first-time homebuyers—check IN.gov for housing and finance info specific to your area.

FAQ About Credit Scores And Homebuying

Check out these commonly asked questions about credit scores and homebuying. If you don’t see your question here, please call our office and we’ll find you the answers you need.

Can I Get A Mortgage With Bad Credit?

Possibly. Some FHA loans are available to buyers with scores as low as 500, but you may need a higher down payment and will likely pay a higher interest rate.

Will My Spouse’s Credit Score Affect Our Loan?

If you’re applying jointly, yes. Lenders usually use the lower of the two scores, so it’s important both of you check and improve your credit if needed.

How Long Does It Take To Raise My Score?

It depends. Small changes may show up in a few weeks, while larger score improvements can take several months. Consistency is key.

Do Medical Bills Or Collections Affect My Mortgage Approval?

They can. Some newer credit models weigh medical debt less heavily, but collections still impact your score and approval chances. Lenders will review your full report.

Is It Better To Pay Off Debt Or Save For A Down Payment?

Both are important, but paying down high-interest debt can improve your credit and DTI ratio, which helps you qualify for better loan terms. Your lender can help prioritize.

Your credit score is one of the most important pieces of the homebuying puzzle—but it’s not the only one. With the help of a knowledgeable real estate agent and a trusted lender, you can figure out your options and make a plan that works. Whether you’re buying in Newburgh, Santa Claus, or nearby, the right team will help you turn your credit into a clear path toward homeownership.

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Are You Thinking of Buying a Home in Dubois County?

Use our site to search homes for sale in Jasper, Dubois, Spencer, Martin and Davis counties, as well as all the surrounding communities. Unlike the “big name” sites out there, at Sell 4 Free Welsh Realty, our site is directly connected to our local MLS. We update it with new homes every hour.

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