Your credit score determines which mortgage programs you qualify for and how much you'll pay. Here's the breakdown by loan type, the rate premium at each tier, and the fastest ways to close the gap.
Credit score minimums by mortgage type: FHA 580 (3.5% down) or 500 (10% down); conventional 620 (standard), 640–680 (better pricing); VA and USDA have no official minimum but lenders typically require 620+. The rate gap between a 680 and a 760 score can be 0.5–1.0 percentage point on a conventional loan — worth roughly $75–$150/month on a $400,000 mortgage.
Your credit score is the first filter lenders apply when you apply for a mortgage. It determines which loan programs you're eligible for, how much down payment you're required to bring, and — perhaps most importantly — what interest rate you'll be quoted. The difference between a 680 and a 760 FICO on a $400,000 conventional loan can be $75–$150/month. Over 30 years, that compounds to a very real number.
Here's the complete breakdown by loan type, what the rate gap actually looks like in dollars, and the fastest levers for borrowers who aren't at their target score yet.
FHA loans. The Federal Housing Administration's minimum credit score requirement is defined in HUD's Single Family Housing Policy Handbook 4000.1: 580 FICO for 3.5% down payment, 500–579 FICO for 10% down payment. FHA is the dominant path for first-time buyers with limited credit history or scores in the 580–620 range. The tradeoff is mandatory mortgage insurance: an upfront MIP of 1.75% of the loan amount (can be financed into the loan) plus an annual MIP that ranges from 0.55% to 1.05% depending on term and LTV.
Conventional loans (Fannie Mae / Freddie Mac). The standard minimum FICO for a conforming conventional loan is 620, per Fannie Mae's Selling Guide. Freddie Mac's conforming standard mirrors this. Most borrowers should target 680+ to avoid the steepest loan-level price adjustments (LLPAs), and 740+ to reach the pricing tier where conventional becomes clearly cheaper than FHA when accounting for mortgage insurance costs. Above 780, pricing adjustments flatten.
VA loans. The Department of Veterans Affairs sets no minimum credit score for VA-guaranteed loans — one of the few programs where the government doesn't impose a FICO floor. Individual VA-approved lenders typically add their own "overlay" minimum, most commonly at 620. VA loans offer 0% down payment for eligible veterans, service members, and surviving spouses, and no private mortgage insurance requirement. The VA funding fee (1.25–3.30% of the loan amount, waived for veterans with service-connected disability) is the primary cost differentiator.
USDA guaranteed loans. USDA's Single Family Housing Guaranteed Loan Program also sets no official credit score minimum, per the USDA program guidelines. Approved lenders typically require 640. USDA loans are limited to eligible rural and suburban areas (USDA has a geographic eligibility map) and have household income limits. They offer 0% down payment for eligible borrowers.
Conventional conforming (higher standards). For borrowers accessing premium conventional products — Fannie's HomeReady, Freddie's Home Possible — the score floor generally starts at 660. These programs allow 3% down payment while staying within conforming loan limits.
The credit score–to–rate relationship isn't linear. Fannie Mae and Freddie Mac use Loan-Level Price Adjustments (LLPAs) — a pricing grid that adds basis points to the rate (or to upfront fees) at each FICO tier below roughly 780. The CFPB's Explore Interest Rates tool lets you compare real-time rate quotes by score tier.
As a general framework from myFICO's mortgage rate guide, the approximate premium tiers on a 30-year conventional loan:
At a $400,000 loan, 0.75% APR difference = roughly $180/month difference in payment. Over 30 years (if you hold the full term), that's more than $64,000 in additional interest. The credit-score investment has a real return.
Below 620: only FHA is available (conventional minimum not met).
620–660: FHA often wins on monthly cost despite the MIP, because the LLPA load on conventional at these scores can exceed the MIP cost.
660–680: The two are close. Run the math: take the FHA upfront MIP (1.75% of loan amount, often financed) + annual MIP (varies by LTV) against the conventional LLPA premium. At high LTVs with a 20%+ LTV, FHA's annual MIP drops after 11 years of payments, but conventional PMI can be removed when equity reaches 20% — which may be faster if property appreciates.
680–740: Conventional starts winning for most borrowers, assuming you can hit the 5–10% down payment threshold where PMI becomes removable. FHA MIP is permanent for most loans with LTV above 90% at origination.
740+: Conventional is clearly better. LLPA costs are minimal, and PMI elimination is achievable as equity builds.
See our Best Mortgages for First-Time Homebuyers 2026 guide for a side-by-side comparison of current FHA and conventional loan programs and lenders.
Pay down revolving balances — first and fastest lever. Credit utilization (balances ÷ credit limits across all cards) is the fastest-moving component of a FICO score. Dropping utilization from 70% to under 30% often produces score gains within 30–45 days of the creditor reporting the updated balance. Under 10% utilization consistently reaches the highest score tier for this factor.
Verify no errors are dragging your score. Under the Fair Credit Reporting Act, you're entitled to one free credit report annually from each bureau at AnnualCreditReport.com. Dispute inaccurate late payments, incorrect balances, or accounts that aren't yours — these can show up in 30–60 days after the bureau investigates.
Don't close old credit cards. Length of credit history and total available credit both contribute to FICO. Closing an old card raises utilization and reduces average account age — typically hurting scores.
Avoid new credit applications 6 months before mortgage application. Each hard inquiry can trim 2–5 points; multiple hard inquiries in a short window can add up. Mortgage rate-shopping is an exception — FICO counts multiple mortgage inquiries within a 14–45 day window as a single inquiry.
Make all payments on time starting now. Payment history is the largest FICO component. A 24-month clean payment history is the foundation lenders want to see.
For borrowers with scores in the 500s working toward FHA eligibility, 6–12 months of focused effort typically moves a file 40–80 points. If you're at 580 targeting 680+ for better conventional pricing, 18–24 months of disciplined credit management is a realistic timeline.
Most buyers can access mortgage financing at a 580 FICO via FHA, but the economics materially improve as you approach 700 and improve again above 740. The rate gap is real, measurable in dollars, and worth a delay of 6–12 months if you're close to a pricing threshold.
If you're not sure where your credit stands, AnnualCreditReport.com and most credit card issuers now provide free FICO score access. Know your number before you start the lender conversation.
For a side-by-side comparison of mortgage programs and lenders, see Best Mortgage Lenders 2026. For a full walkthrough of the homebuying process, see Best Mortgages for First-Time Homebuyers 2026.
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This content is for educational purposes only. ClearValue Lending is a financial-education and comparison platform, not a lender, broker, or financial advisor. Mortgage program requirements, loan limits, and interest rates change frequently — verify current requirements directly with lenders or at hud.gov, fanniemae.com, and sba.gov before applying.
It depends on the loan type. FHA loans — backed by the Federal Housing Administration — accept a 580 FICO score with 3.5% down, or as low as 500 with 10% down, per HUD's 4000.1 handbook. Conventional loans (Fannie Mae/Freddie Mac) require 620 at minimum. VA loans (for veterans and service members) set no official minimum — the Department of Veterans Affairs doesn't require a specific score — but most VA lenders set their own overlay at 620. USDA rural loans also have no official floor but lenders commonly require 640.
Significantly. FHFA's loan-level price adjustments (LLPAs) add cost at each score tier below 780. The CFPB's rate-comparison tool shows that on a $300,000 30-year conventional loan, a borrower with a 700 score might pay 0.5–1.0 percentage point more than a borrower with a 760 score. At $400,000, that gap costs roughly $75–$150/month and $27,000–$54,000 over the life of the loan.
Yes, via FHA. The FHA program accepts 580 with 3.5% down, meaning a 600 score qualifies for the 3.5% down tier. You'll pay an upfront MIP of 1.75% of the loan amount plus an annual MIP of 0.55–1.05% (depending on term and LTV), per HUD guidelines. Conventional is generally not available below 620. Some portfolio lenders and credit unions set their own criteria and may lend at 600, but those programs are not standardized.
Small improvements — paying down a card below 30% utilization, disputing an error — can show up in 30–45 days when the creditor reports to the bureaus. Larger improvements from building a positive payment history take 6–12 months of consistent on-time payments. Removing a collection or late payment through dispute (if the item is inaccurate) can improve scores faster. A 580–620 gap is achievable in 3–6 months for many borrowers; 620–740 realistically takes 12–24 months of disciplined credit behavior.
A rate lock is a lender's commitment to hold a specific interest rate for a defined period — typically 30, 45, or 60 days — while your loan application is processed. You should lock when you have a signed purchase contract and are confident in your closing timeline. Floating (not locking) exposes you to rate increases; locking prevents you from benefiting if rates fall. Most lenders offer free lock-and-extend if your closing is delayed within the lock window.