There’s a lot to think about when buying a home between getting funding for a down payment and closing costs, making the winning offer, and gathering documents to give the lender. It’s important not to overlook your credit score. Lenders look at your history to determine the likelihood you’ll be able to handle your payments. What credit score do you need for a mortgage? We’ll also talk about how to get the best rates.
Buying a home is an exciting milestone. But having less-than-perfect credit can make it more challenging. If your credit score is around 560, you may be wondering if it’s possible to buy a house.
The short answer is yes! While a 560 credit score is considered “very poor” by credit scorers, it doesn’t make homeownership unattainable. However, your options are more limited than someone with excellent or good credit. Understanding the factors that lenders consider can help you strategize for mortgages with low credit requirements.
What Credit Score is Needed to Buy a House?
The mortgage credit score needed to buy a home depends on the type of loan. Here’s a look at common requirements:
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Conventional loans – These traditional mortgages backed by private lenders typically require a minimum score of 620. The higher your score, the better your interest rate and terms will be. With a 560 score, conventional loans will be difficult to obtain.
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According to the Federal Housing Administration, FHA loans are backed by insurance and can be obtained with a credit score as low as 500 and a 10% down payment. A minimum score of 580 is needed for just 3. 5% down. FHA loans are a great choice for buyers with fair or bad credit.
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VA loans – These mortgages guaranteed by the U. S. Department of Veterans Affairs don’t have an explicit minimum score. But most lenders look for at least 620. Veterans or surviving spouses with bad credit may be able to get a VA loan if they have the right paperwork.
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USDA loans – For low- to moderate-income buyers in rural areas, USDA loans don’t state a minimum score. However, lenders often want to see at least 640. With zero down payment options, they can assist buyers with weaker credit.
FHA Loans: Your Best Option with a 560 Credit Score
Given its low credit score requirements, an FHA mortgage will be the easiest type of financing to obtain with a 560 score. Here are some key facts about FHA loans:
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They’re insured by the Federal Housing Administration and were created to help expand affordable housing. Because the FHA takes on default risk, lenders can offer mortgages to borrowers they may otherwise decline.
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Minimum credit scores vary from 500 to 580 depending on your down payment amount. With 10% down, you can qualify with a 500. At 3.5% down, 580 is typically required.
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The FHA looks at more than just your credit score. They look at your income, assets, debts, and cash reserves. Meeting their standards demonstrates you can manage mortgage payments.
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Interest rates on FHA loans may be slightly higher than conventional mortgages, but are still competitive. With mortgage insurance premiums, overall costs are higher so it helps to make a larger down payment if possible.
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You’ll pay an upfront mortgage insurance premium of 1.75% of the loan amount and an annual premium of 0.45% to 1.05% of the base loan amount. This protects the lender in case you default.
Getting pre-approved for an FHA loan will allow you to home shop with confidence knowing your 560 score meets eligibility requirements. Work with a reputable lender and be ready to provide all necessary documentation.
Tips for Homebuying Success with a 560 Credit Score
A 560 credit score makes getting a mortgage more difficult but not impossible Here are some tips to boost your homebuying success
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Save for a larger down payment – Putting down more upfront can help you qualify and lower mortgage costs. Save aggressively so you can make at least a 10% down payment.
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Reduce debts – Lenders will look at your total debts including credit cards, auto loans, student loans, and personal loans. Pay down balances as much as possible so your debt-to-income ratio allows you to qualify.
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Avoid new credit – New credit inquiries and accounts can lower your score further. Hold off on applying for financing until you’re ready to buy. Shop for mortgage rates within a short time period so inquiries are grouped.
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Add a co-signer – Bringing on a co-borrower with stronger credit can improve your chances. Make sure the co-signer understands they’re equally responsible for making payments.
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Get pre-approved – Going through pre-approval shows sellers you’re creditworthy. Locking in a rate also protects you if scores drop before closing.
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Know your budget – Carefully consider what you can afford in a monthly payment including taxes, insurance, HOA fees, maintenance, and utilities. Build in a buffer so you’re not house poor.
While buying a home with a 560 credit score requires effort, it’s achievable with proper preparation. Seek assistance from housing counselors and mortgage professionals. With persistence and smart strategies, you can join the ranks of homeowners despite less-than-ideal credit.
Tip #3: Don’t apply for too much credit
You should resist the urge to apply for more credit cards as you try to build your credit score. New credit applications put hard inquiries on your credit report. Too many hard inquiries can negatively affect your credit score.
Tip #2: Pay your bills on time
A large part of what a lender wants to see when they evaluate your credit is how reliably you can pay your bills. This includes all monthly payments, not just auto loans or mortgages. For example, utility bills and cell phone bills matter, too.
Can I Buy A House With A 560 Credit Score? – CreditGuide360.com
FAQ
Can I get a house with a credit score of 560?
You’ll typically need a credit score of 620 to finance a home purchase. However, some lenders may offer mortgage loans to borrowers with a score as low as 500. Oct 15, 2024.
What is the lowest credit score to buy a house?
The lowest credit score to buy a house generally depends on the type of mortgage you’re applying for. For conventional loans, a score of at least 620 is typically required.
What credit score is needed for a $250000 house?
What credit score do I need to buy a $250,000 house? You can buy a $250,000 house with a wide range of credit scores, from as low as 500 to as high as 800+. Mar 19, 2025.
How big of a home loan can I get with a 580 credit score?
Home buyers with a credit score at or above 580 can borrow up to 96. 5% of a home’s value. As long as the borrower has a down payment of at least 10%, they may still be able to get an FHA loan with a credit score of 500 or higher. However, many lenders have their own minimum credit score requirements.