Mortgage and Real Estate Blog


Credit scores and how they affect mortgage loan approval

Minneapolis / St Paul, MN:  When buying a home, your credit matters - a lot. While credit scores alone don't get you a home loan approval, credit scores are one of the most important factors in the loan approval decision.  With places like Credit Karma, and being getting your credit score with your credit card statement, most people have a pretty good idea of where they scores average. 

But how does that score correlate to mortgage loan approvals, and what credit score do you need for loan approval?

What Credit Scores Mean In Mortgage Approval

Understandably, the better your credit score, the more likely you’ll get approved for a loan, and the more options you’ll have. Mortgage loans still look at many other things, including debt-to-income rations, job stability, size of down payment, past bankruptcies and foreclosures, etc.

I am asked on a regular basics what is the lowest score we accept for FHA, or conventional loans. Review the charts below to get an idea.

Credit score factors

Standard Conventional Loan Scores

  • 740 score and higher = Access to all program options, and the best rates in the market
  • 720 – 739 score = Access to all program options, and maybe a slight increased rate (.125%)
  • 700 – 719 score = Access to most program options, and maybe a slight increased rate (.25%)
  • 680 – 699 score = Some higher risk program options disappear, and a slight increased rate (.375%)
  • 640 – 680 score = All higher risk options go away, and a bigger increase to interest rate (.50%)
  • 620 – 639 score = Very few lenders offer loans in this range
  • 619 or less = Denied

FHA and VA Loan Scores

  • 640 and above = Generally approved, and the best rates available
  • 620 – 639 = Lots of lenders don’t offer below a 620 score, and interest rate slightly higher
  • 580 – 619 = Huge amount of lenders no longer offer FHA or VA loans at this score level, and rates .50% higher
  • 500 – 579 = Very limited number of lenders offer these loans. Very hard to get approved. Minimum down payment jumps to 10% for FHA loans.  Rate easily .50% higher or more.

Other factors also come into play, for example, most down payment assistance programs are not available with credit scores below 640.


Yes, very bad credit sub-prime loans do exist.

Recen't major credit issues, like bankruptcy and foreclosure, or just straight up bad credit does not necessarily prevent you from buying a home.  Generally speaking, expect to need at least 10% for down payment, and commonly 20% or more down is needed. Expect to pay a higher interest rate. How high depends on your credit score.

Do not expect miracles. For example, I just recen't have a client inquiry about a sub-prime loan who has a lot of recen't late mortgage payments over 120 days old. This person whas denied.

If your score is below 500, expect a denial.


Clearly credit is important in the mortgage loan approval process. It is always best do do everything possible to improve credit before applying for a home loan.


Mortgage broker in MN, WI, SD

Ready to apply for a home loan?  For home mortgage loans in MN, WI, and SD, just click here to get started. If in another state, we suggest contacting a local mortgage broker in your area for the best deals and options.

Comment balloon 0 commentsJoseph Metzler • September 04 2018 04:07PM
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