For those looking to buy a home, knowing the credit score and down payment requirements is key to navigating the mortgage process. At Supreme Lending, we understand that buying a home is one of the most significant financial decisions you’ll make, and we’re here to guide you through it. Whether you’re a first-time homebuyer or looking to make a move, understanding these requirements may help you better prepare for your journey to homeownership.
Why Credit Scores and Down Payments Matter
Your credit score and down payment are two very important factors that lenders review when determining your eligibility for a mortgage and the terms of your loan.
- Credit Score. Your credit score reflects your creditworthiness and financial habits, like how reliably you pay your bills or manage debt. A higher credit score may make you eligible for more favorable rates and terms, potentially saving you money over the life of the loan.
- Down Payment. The amount you pay upfront on your home also impacts the type of loan you qualify for and your monthly mortgage payments. A larger down payment helps reduce your loan amount, lowering your monthly payments. But don’t believe the mortgage myth that you must put 20% down, there are several lower down payment options today!
Credit Score and Down Payment Requirements by Loan Type
With a variety of mortgage options comes a variety of guidelines and qualifications. Credit score and down payment requirements depend on the type of loan you choose. Here’s a breakdown of common requirements by loan type.
Conventional Loans
- 620 minimum credit score
- 5% minimum down payment and 3% for first-time homebuyers
Conventional loans are an ideal option for those with a solid credit score, while also allowing for lower down payment requirements. If you put down less than 20%, however, you may need to pay for private mortgage insurance until you reach 20% equity built in your home.
FHA Loans
- 580 minimum credit score
- 5% minimum down payment
FHA loans are a popular choice for first-time homebuyers or those with lower credit scores. With a down payment requirement of 3.5%, it may also be easier to qualify for FHA. It’s important to note, FHA loans do require mortgage insurance premiums, which are for the life of the loan.
VA Loans
- 580 minimum credit score
- No down payment requirement
VA loans are available to eligible military veterans, active-duty service members, and surviving spouses. With no down payment and no mortgage insurance required, a VA loan is an affordable option to help both first-time and repeat buyers who have bravely served our country. While there’s no down payment requirement, there is a small, one-time VA funding fee at closing to be aware of.
USDA Loans
- 600 minimum credit score
- No down payment requirement
USDA loans are designed to help people in rural areas, offering 100% financing with no down payment. If you’re purchasing a property located in an eligible designated rural area, this may be a great option to secure financing with no upfront down payment.
Jumbo Loans
- Credit score requirements vary, typically at least 680 minimum
- Down payment requirements vary, typically 10%-20% minimum
Jumbo loans are used to purchase high-value properties with a loan amount greater than conforming loan limits. Due to potentially higher risk for lenders, qualifications for Jumbo programs tend to be stricter.
How to Prepare for Your Mortgage
Once you understand the different credit score and down payment requirements, it’s essential to get pre-qualified to help you prepare for the loan process. When you get pre-qualified, your lender will review your financial details that you provide, such as credit score, income, and savings for a down payment. Based on this information, they can give you a general estimate of how much you may be able to afford, and which loan options may be right for you.
Ready to Get Started?
Our experienced team at Supreme Lending is here to help you with your home purchase every step of the way—from pre-qualification to closing. When you’re ready to explore your mortgage options, contact us to get started!
Related Article: Making Homeownership More Accessible: No & Low Down Payment Options