Buying a home is exciting. But your credit score can change everything. Your credit score tells lenders how you handle money. It helps them decide:
- If they should give you a mortgage
- How much money you can borrow
- What interest rate you will pay
A higher credit score = better mortgage options
A lower credit score = fewer choices and higher costs
Let’s break this down in a very simple way.
What Is a Credit Score?
A credit score is a number that shows how good you are with credit. In the U.S., credit scores usually range from:
- 300 – 579 → Poor
- 580 – 669 → Fair
- 670 – 739 → Good
- 740 – 799 → Very Good
- 800 – 850 → Excellent
Lenders use this number to measure risk. If your score is high, they feel safe lending you money.
Why Credit Score Matters for a Mortgage
Mortgage lenders look at your credit score first. It affects:
- Loan approval
- Interest rate
- Loan type
- Down payment amount
- Private Mortgage Insurance (PMI)
Even a small change in your score can cost or save you thousands of dollars over time.
Not sure if your credit score is mortgage-ready?
Our specialists can review your situation and guide you toward the best home loan options , with no pressure.
How Different Credit Score Ranges Affect Your Mortgage
Poor Credit Score (300–579)
Getting a mortgage is very hard in this range.
You may face:
- Loan rejection
- Very high interest rates
- Large down payment requirements
- Strict lender rules
Some lenders may still approve you, but the loan will cost much more over time.
Fair Credit Score (580–669)
You have more options, but they are still limited.
You may qualify for:
- FHA loans (popular for lower scores)
- Higher interest rates than average
- Mortgage insurance payments
You will likely pay more each month compared to someone with good credit.
Good Credit Score (670–739)
This is a strong range.
You can expect:
- Easier loan approval
- Better interest rates
- More lender choices
- Lower monthly payments
Most conventional loans become available in this range.
Very Good Credit Score (740–799)
You are now a low-risk borrower.
Benefits include:
- Lower interest rates
- Lower mortgage insurance costs
- More negotiating power with lenders
- Access to premium loan options
You save a lot of money over the life of the loan.
Excellent Credit Score (800–850)
This is the best position.
You get:
- The lowest interest rates available
- Fast approvals
- Best loan terms
- Maximum lender trust
You can save tens of thousands of dollars compared to someone with fair credit.
How Credit Score Affects Your Interest Rate
Your interest rate decides how much extra money you pay the bank.
Here’s the simple truth:
- Lower score = Higher interest
- Higher score = Lower interest
Even a 1% higher rate can add $100–$300 more per month depending on your loan size. Over 30 years, that can mean $40,000 to $80,000 more paid.
Want to see what interest rate you could qualify for?
Talk to our mortgage team today and get personalized loan options based on your credit profile.
How Credit Score Affects Loan Types
Your score decides which loans you can get.
With Lower Credit (580–640)
You may qualify for:
- FHA Loans (government-backed)
- Higher fees and insurance
- Lower borrowing limits
With Mid to Good Credit (640–700)
You can access:
- Conventional loans
- FHA loans with better terms
- More lenders willing to work with you
With High Credit (700+)
You can qualify for:
- Conventional loans with low rates
- Jumbo loans
- Adjustable-rate mortgages (better terms)
- Special lender programs
More choices = more control over your future payments.
How Credit Score Affects Your Down Payment
Your credit score can change how much cash you need upfront.
- Lower score → Lenders may ask for larger down payment
- Higher score → You may qualify for low down payment options
Strong credit shows lenders you are less risky, so they feel safer with smaller down payments.
How Credit Score Affects Mortgage Insurance (PMI)
If you put less than 20% down, lenders charge Private Mortgage Insurance (PMI).
Your credit score affects:
- Whether PMI is required
- How expensive PMI will be
Lower credit score = Higher PMI cost
Higher credit score = Lower PMI cost
This can add $50–$300+ per month to your payment.
Real Example: Same House, Different Credit Scores
Let’s say two people buy a $300,000 home.
| Credit Score | Interest Rate | Monthly Payment (Approx.) |
| 620 | Higher rate | Much higher payment |
| 760 | Lower rate | Much lower payment |
The person with better credit could save hundreds per month and tens of thousands over time.
How to Improve Your Credit Before Applying
Improving your score before applying can save you a lot of money.
Here are simple steps:
- Pay all bills on time
- Keep credit card balances low
- Do not open many new accounts
- Do not close old credit cards suddenly
- Check your credit report for errors
- Pay down existing debt
Even a 20–40 point increase can improve your mortgage options.
When Lenders Check Your Credit
Lenders check your credit:
- When you apply for pre-approval
- Again before final loan approval
Big changes (like missed payments or new debt) can hurt your loan approval. Stay financially stable during the home-buying process.
Key Takeaways
Your credit score directly affects:
- Whether you get approved
- Your interest rate
- Your monthly payment
- Your loan options
- Your total cost over time
Better credit = cheaper home loan
Working on your credit before buying a home is one of the smartest financial moves you can make.
Read More Is a 15-Year vs. 30-Year Fixed Loan Better for the 2026 Housing Reset?
FAQs
What credit score do I need to buy a house?
Most lenders prefer 620 or higher, but FHA loans may allow scores as low as 580.
Can I get a mortgage with bad credit?
Yes, but you will likely pay higher interest rates and fees.
Does a higher credit score lower my mortgage payment?
Yes. A higher score usually means a lower interest rate, which lowers your monthly payment.
How much can a low credit score cost me?
It can cost tens of thousands of dollars more over the life of your loan.
Will checking my credit hurt my score?
A soft check does not hurt. A mortgage lender check may lower it a few points temporarily.
Can I improve my credit score before buying a home?
Yes. Paying bills on time and reducing debt can raise your score in a few months.
Do all lenders use the same credit score?
No. Lenders may use different scoring models, but all focus on your credit history.
