If you’re thinking about buying a house, the first question on most people’s minds is: "Do I have good enough credit?" The short answer is yes, you can improve your odds, and the long answer is a bit more detailed. In this guide we’ll break down the main credit factors lenders use, why they matter, and what you can do right now to strengthen your application.
Most banks set a minimum credit score of around 620 for a conventional loan. If you’re applying for an FHA loan, that floor can drop to 580, but you’ll need a larger down payment if you’re under 620. Private lenders sometimes accept scores as low as 580, but they typically charge higher interest rates. The takeaway? Aim for at least a 620 score for the best mix of options and rates.
How do you know where you stand? Grab a free credit report from any of the big bureaus and check the three‑digit number. If it’s below 620, focus on paying down credit card balances and fixing any errors. Even a 20‑point bump can move you into a better bracket.
Lenders don’t just look at numbers on your credit report. They compare your total monthly debt payments to your gross monthly income, known as the debt‑to‑income (DTI) ratio. A DTI of 36% or less is ideal; many lenders will still approve up to 43% if other factors are strong.
To calculate your DTI, add up rent or mortgage payments, car loans, credit‑card minimums, student loans, and any other recurring debt. Divide that total by your pre‑tax monthly income and multiply by 100. If the result is above 40, think about paying off a credit card or delaying a large purchase until after you’ve secured the loan.
Besides the score and DTI, lenders want to see a stable employment history. Two years in the same job or field is a common benchmark. If you’ve switched careers recently, be ready to provide proof of consistent income, such as recent pay stubs or tax returns.
Now that you know the main criteria, here are three quick actions you can take today:
Remember, credit requirements aren’t set in stone. Different loan programs—FHA, VA, conventional, or a bank’s own product—have their own thresholds. If you’re close to a cutoff, ask the lender about “seasoning” options, where you wait a few months while you improve your score.
Finally, keep your credit activity low during the application process. Opening new credit cards or taking out big loans will raise your DTI and could trigger a hard inquiry that temporarily dips your score.
By focusing on these core areas—score, DTI, and stable income—you’ll have a solid foundation for any mortgage you apply for. Good luck, and happy house hunting!
