A score of 620 on your credit report generally falls into the “fair” territory, according to widely accepted credit rating systems.
What Credit Score Do You Actually Need to Buy a House?
On the FICO spectrum, 620 lands you in the “fair” credit zone, which sits below the average and often flags you as somewhat risky to lenders. Similarly, other scoring models label similar numbers “fair,” sometimes accepting scores as low as 500. But keep in mind, a higher upfront down payment is typically required compared to applicants boasting scores north of 580.
Mortgage Options With a 620 Credit Score
Several popular home loans set 620 as the minimum or close to it, including:
- Conventional Loans: Backed by private banks or lenders without government guarantees, these loans demand at least a 620 to be considered. However, hitting this mark doesn’t guarantee approval, nor does it unlock the lowest rates reserved for higher-credit borrowers.
- FHA Loans: These government-backed mortgages are favored by first-time buyers. While the minimum cutoff can be as low as 500 with a 10% down payment, a 620 score comfortably exceeds that baseline.
- VA Loans: If you’re a veteran, active service member, or surviving spouse, this no-down-payment option guaranteed by the U.S. Department of Veterans Affairs often doesn’t have a formal minimum score, though lenders generally like to see 620 or better.
On the flip side, certain loan types are out of reach unless you boost your credit:
- Jumbo Loans: If you’re aiming for a mortgage that tops government limits — for 2024, that’s $766,550 for most regions — you’ll typically need a credit score hovering around 700 or higher.
- USDA Loans: Targeted at low-to-moderate income buyers in rural areas, USDA loans usually require a score north of 640, which means a 620 wouldn’t cut it.
2024 Mortgage Loan Limits Snapshot
This year, the federal limit for conforming loans in most U.S. counties is set at $766,550. Loans above this threshold fall into the jumbo category, which demand stricter credit qualifications, often requiring scores of 700 or above.
How Does a 620 Score Shape Your Homebuying Budget?
Your credit rating casts a long shadow on the interest rates and overall loan conditions you’ll be offered. Simply put, the better your score, the lower the interest rate lenders will likely extend — translating into major savings over time.
For instance, consider a conventional mortgage with a 620 credit score: lenders may quote you an interest rate that’s noticeably higher than one for a borrower with a stronger credit profile. Suppose at 6.5%, your monthly principal and interest payments come to about $2,395; bump the rate up to 7.5%, and it climbs to roughly $2,517—a difference that accumulates to $1,464 annually, summing close to $44,000 over 30 years.
Boosting Your Credit Score: Practical Tips
The credit score ceiling for both FICO and VantageScore tops out at 850, so at 620, you’re still a fair bit of ground away from prime territory. Here’s how to shift your numbers upward before chasing that home purchase:
- Stick to Your Payment Schedule: Payment history reigns supreme in credit calculations. Timely repayments prove to lenders that you’re capable of managing debt responsibly.
- Manage Your Credit Usage Wisely: Your credit utilization ratio measures the balance you owe against your total available credit. For example, owing $5,000 on a $10,000 limit equals a 50% utilization. Chipping away at balances or requesting a credit limit hike can help optimize this ratio.
- Hold Off on Account Changes: Stability matters. Avoid opening new credit lines or closing longstanding accounts during the mortgage application process to preserve a solid financial footprint.
Next Steps on Your Homebuying Journey
If your credit score hovers around 620, elevating it could unlock better loan terms and rates, easing the path to homeownership. Local real estate professionals often play a key role in guiding you through each phase—from scouting suitable homes within your price range to sealing the deal at closing.
Frequently Asked Questions
Can I actually buy a home with a 620 credit score?
Absolutely. A 620 rating meets the minimum criteria for many mortgage types like conventional loans. Yet, remember that lenders weigh multiple factors beyond just your credit score, and a 620 doesn’t guarantee loan approval.
Is now a smart time to buy, or should I hold off?
With a 620 credit score, scoring the lowest interest rates is unlikely. If you can afford to wait, improving your credit before applying could score you a more favorable mortgage offer down the road.
How much property can I realistically afford?
Budgeting roughly $2,100 monthly for mortgage payments can give you an approximate idea of what price range might be within reach.