Conventional Loans

What Is the Minimum Credit Score Required for a Conventional Loan?

Sep 11, 2018, 1:23 PM | Sarah Woodbury
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Credit score is one of the most important indicators of whether or not your application for a conventional loan will be accepted.

Many potential borrowers who apply for conventional loans have excellent credit, but if you're around average or even just a little low, there may still be a place for you in the conventional mortgage world.

What Is a Conventional Loan?

A conventional loan is a type of loan that is offered by private lenders and is not backed by the government, like FHA or USDA loans. It is instead insured by Fannie Mae and Freddie Mac, which are government-sponsored enterprises (GSEs). It is also either sold to lenders or kept as an investment by the GSEs.

Required Credit Score for a Conventional Loan in 2018

Though requirements vary between lenders, you'll usually want a relatively high credit score in order to qualify for a conventional loan with desirable terms.

A score of about 640 to 680 will get you okay terms. A score of 700 and up is pretty good and will get you corresponding terms, and a score that is 720 and above is considered great.

What Is the Minimum Credit Score for a Conventional Loan in 2018?

Scores of 620 to 640 are considered the minimum credit score range that conventional loan lenders will take. But even then, when you're on this lower end, you may not find as many lenders willing to give you a loan.

Though you should speak to lenders for your specific situation, a credit score of 680 or above is generally the best place to be if you want to be considered for a conventional loan.

Keep in mind that the higher your credit score, the better rates you're likely to get. With a higher score, you're less of a risk to lenders, so they're often willing to give you a better deal in other areas.

Loan level price adjustment (LLPA) corresponds higher scores to lower rates, and vice versa. For a matrix of LLPA, check out Fannie Mae's page.

What If I'm on the Lower End of the Credit Requirements?

If you're barely making the minimum credit score required—or aren't making it at all—you may want to consider an FHA loan. These are government-backed loans (non-conforming) that allow for lower credit scores and down payments than many other loan types. FHA loans accept credit scores down to about 500 in some cases.

Or, if you're a veteran and are eligible for a VA loan, this is often a great route to take. Though credit does still matter in the deal because they're offered by private lenders, the VA does not require minimum credit score for VA loans.

Things That Impact the Required Credit Score

Though the required credit score for conventional loans remains within a general range, there are factors that can impact what kinds of scores a lender might be willing to give. These include:

  • A Down Payment – When you make a large down payment, lenders will be more likely to offer you a loan with better rates.
  • Reserve Funds – Larger cash reserves are an encouraging sign to lenders, showing that even in an emergency, you'd be able to make payments for awhile.

Doing well in these and other conventional loan requirements will influence what type of deal a lender will be willing to give you.

Why Does Credit Matter for Mortgages?

When considering lending you money, lenders want to be sure that you'll be able to repay the loan.

A FICO score, or credit score, is calculated with information from the three main credit reporting bureaus.

Because you credit score is based on your credit history, it is an indicator of how well you've handled money in your past. It's important to lenders because it gives them an idea of what kind of a risk you are as a borrower.

Just like you, they want to be careful about who they're going into business with.

Our Team Can Help

Here at Elevate Mortgage Group, we strive to make sure that our clients are aware of their options before making a decision on a mortgage. We understand just how serious a home loan is and work hard to make sure we find the right one for your unique situation.

If you have any questions about loan requirements, want to get a bid on a loan, or have questions on anything mortgage, please call our mortgage professionals at (888) 935-3828.

Sarah Woodbury