Conventional Loans:
- Minimum Credit Score: 620
- Details: Conventional loans are not backed by a government entity. They typically require a stronger credit profile compared to government-backed loans, hence the higher minimum credit score. Applicants with higher credit scores can benefit from better interest rates.
FHA Loans (Federal Housing Administration):
- Minimum Credit Score: 500 with a 10% down payment, 580 with a 3.5% down payment
- Details: FHA loans are designed to help lower-income and first-time buyers. They offer more lenient credit requirements compared to conventional loans. A credit score of 580 qualifies for a lower down payment of 3.5%, whereas scores between 500-579 require a 10% down payment.
VA Loans (Veterans Affairs):
- Minimum Credit Score: Typically 580-620, depending on the lender
- Details: VA loans are available to veterans, active service members, and certain military spouses. While the VA does not set a credit score requirement, most lenders have their own minimums, usually in the 580-620 range.
USDA Loans (United States Department of Agriculture):
- Minimum Credit Score: 640
- Details: These loans are geared towards rural homebuyers with lower to moderate incomes. They require no down payment, but applicants must meet credit guidelines, including a minimum credit score usually set by lenders at 640.
Each loan type has different advantages and eligibility requirements, making it crucial for borrowers to assess their financial situation, credit score, and the specific loan criteria to determine the most appropriate mortgage option.
Related reading: debt-to-income ratio requirements and private mortgage insurance requirements.