Credit Score Needed to Buy a $250,000 Home

• by Corbin Fairweather
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Thinking about snapping up a $250,000 house but not sure whether your credit score will let you in the door? You’re not alone. Lenders use a handful of numbers to decide if they’ll hand you a mortgage, and the credit score is the headline act. Below we break down exactly what score you need, how it shapes your loan terms, and what you can do right now to tip the odds in your favor.

What lenders consider “good enough” for a $250k mortgage

In the United States, most banks and mortgage companies follow the guidelines set by the major credit bureaus-Equifax, Experian, and TransUnion. The FICO® scoring model still dominates, ranging from 300 to 850. Roughly speaking, here’s how the bands translate to mortgage eligibility:

• Excellent (720‑850): Almost any loan program will welcome you, often with the best interest rates.
• Very Good (690‑719): Conventional loans are a safe bet, and you’ll still see competitive rates.
• Good (620‑689): You’ll likely qualify for government‑backed loans (FHA, VA) but may face higher rates on conventional financing.
• Fair to Poor (300‑619): Options shrink dramatically; you may need a larger down payment or a co‑signer, and rates can jump sharply.

For a $250,000 home, most buyers aim for a credit score of at least 620 if they’re leaning on FHA or VA loans, and a minimum of 660‑680 for a conventional loan that doesn’t require private mortgage insurance (PMI).

How the $250,000 price tag changes the numbers

The purchase price sets the ceiling for two key figures: the loan amount and the required down payment. Lenders usually want a loan‑to‑value (LTV) ratio of 80% or lower for a conventional loan without PMI. That means:

1. Loan amount = 80% of $250,000 = $200,000
2. Down payment = $50,000 (20% of the price)

If you can’t muster a 20% down payment, you’ll either pay PMI or look to a program that allows a higher LTV, like an FHA loan that can go up to 96.5% LTV (only 3.5% down). However, FHA loans come with a mandatory mortgage insurance premium (MIP) that stays for the life of the loan unless you refinance.

Loan programs and their minimum credit scores

Below is a quick snapshot of the most common loan types and the credit score thresholds lenders typically enforce for a $250k purchase.

Why your credit score shapes the interest rate (and monthly payment)

The mortgage rate you lock in directly influences how much you’ll pay each month. As a rule of thumb, a 20‑point increase in credit score can shave roughly 0.15%‑0.25% off the APR. Let’s see a quick example:

1. Loan amount: $200,000 (80% LTV)
2. Scenario A - Score 680: 4.75% APR, 30‑year fixed → $1,044 monthly principal & interest.
3. Scenario B - Score 720: 4.25% APR → $985 monthly principal & interest.

That $59 difference adds up to over $2,100 in savings over the life of the loan. The gap widens if you’re borrowing more (e.g., a 90% LTV loan) or if rates rise market‑wide.

Other underwriting factors that matter alongside the score

Even with a perfect credit score, lenders look at three extra boxes before saying “yes.”

• Debt‑to‑Income Ratio (DTI) total monthly debt payments divided by gross monthly income - most lenders cap DTI at 43%, though some programs stretch to 50% with strong compensating factors.
• Employment History stable job for at least two years - gig‑workers may need additional documentation.
• Loan‑to‑Value (LTV) ratio of loan amount to home appraised value - lower LTV equals lower risk, which can offset a middling score.

When you line up a solid DTI, steady job, and a modest LTV, lenders can be more forgiving on the credit score.

Steps to boost your credit score before applying

If you’re sitting at 620‑650 and want to move into the “good‑rate” zone, here’s a pragmatic checklist you can start today:

• Check your credit reports. Pull free reports from annualcreditreport.com and dispute any errors-one wrong late payment can shave 30‑50 points.
• Pay down revolving balances. Aim for a credit utilization under 30%, ideally under 10% for the fastest score lift.
• Avoid new credit inquiries. Each hard pull can dip the score by 5‑10 points and stays on the file for two years.
• Set up automatic payments. Consistently on‑time payments are the biggest driver of score growth.
• Keep old accounts open. Length of credit history matters; closing a decade‑old card can hurt.

Following these steps for three to six months can often push a score 30‑50 points upward-enough to shave a quarter point off the rate.

Quick cheat sheet: What you need for a $250k house

Frequently Asked Questions