What Credit Score Do You Need to Buy a Home?

⏱️ 17 min read

For a lot of families in Indiana and Kentucky, the decision to build a new home starts with a question they’re almost afraid to ask out loud: “Is my credit score good enough?”

It’s one of the most common concerns families bring to Jagoe’s team. And the answer is almost always better news than people expect. There isn’t one magic number. It depends on which loan type fits your situation. Most families shopping for a new home qualify with scores in the mid-600s, and some programs allow scores even lower.

This article covers where the thresholds actually fall, what mortgage lenders consider beyond the number itself, and practical steps you can take to put yourself in the strongest possible position.

The Short Answer: What Score Do You Need?

For most conventional financing, the minimum credit score needed is 620. FHA loans allow scores as low as 580 with a 3.5% down payment, or 500 with 10% down. VA and USDA loans have no agency-set floor, though most lenders establish their own practical minimums around 620 for VA and 640 for USDA.

Here’s a quick reference by loan type:

These are floors, not targets. Borrowers who clear the bar at 620 will face higher interest rates and more expensive mortgage insurance than someone at 720 or 760. The difference in what you actually pay each month. Over the life of the loan, that adds up to real money.

In November 2025, Fannie Mae eliminated its strict minimum credit score requirement, shifting underwriting toward a broader look at borrower risk, including reserves and overall debt levels. A 620 remains the practical threshold at most lenders, but the change signals a more flexible evaluation framework going forward.

These thresholds reflect national standards and typical lender overlays. Jagoe’s preferred lending partner, Acrisure Mortgage, works with buyers using specific programs tailored to our markets. Talk to an Acrisure Mortgage loan officer early in your search to get a clear, real-world picture of where you stand.

Each loan type gets you to that threshold a different way. Here’s how they break down for buyers in Indiana and Kentucky.

Understanding the Loan Types

The loan that makes the most sense for your family depends on your credit history, down payment, and where you’re buying. Here’s how the four main options break down.

Conventional Loans

Conventional loans are the most common choice for move-up buyers with solid credit histories and stable income. The qualifying threshold is 620, but a higher credit score translates directly into better loan terms.

Lenders price risk in tiers. Buyers in the 620–639 range face the steepest rates and highest mortgage insurance costs. The 680–739 range hits a sweet spot for many move-up buyers, offering competitive pricing, reasonable PMI, and strong approval odds. At 780 and above, borrowers reach top-tier pricing on most rate sheets.

Private mortgage insurance is required when a down payment falls below 20%, with annual costs typically ranging from 0.58% to 1.86% of the loan amount depending on your score and loan-to-value ratio. A higher credit score reduces those costs meaningfully.

If household income is moderate, Fannie Mae’s HomeReady program and Freddie Mac’s Home Possible program offer 3%-down financing with a 620 floor. Both are worth asking about if you’re strong on credit but still building savings.

FHA Loans

Federal Housing Administration (FHA) remains one of the most flexible financing options for buyers across Indiana and Kentucky. The qualifying score is 580 for the standard 3.5% down payment option. Scores between 500 and 579 may still qualify with 10% down.

FHA loans carry an upfront mortgage insurance premium of 1.75% of the loan amount, typically financed into the loan, plus an annual premium paid monthly. Depending on your down payment, that mortgage insurance can last 11 years or the full life of the loan. That is a meaningful difference from conventional PMI, which cancels when you reach 20% equity.

These loans are not just for buyers with credit challenges, though. They’re also more forgiving on debt levels and past credit events like bankruptcies and foreclosures, which makes this an option worth considering for move-up buyers who’ve had a rough stretch but have since rebuilt their credit history. FHA may also consider non-traditional credit, like a strong record of on-time rent and utility payments, for borrowers with limited traditional files. For move-up buyers who’ve landed back on solid ground, that flexibility is worth knowing about.

VA Loans

If you or your spouse served in the military, a VA loan is worth a close look. The Department of Veterans Affairs doesn’t set a score requirement. The flexibility is intentional, but most lenders set their own standard of at least 620 in practice. If you use Jagoe’s lender, the standard practice is 580.

VA loans allow 0% down payment for eligible borrowers with full entitlement, and they replace monthly mortgage insurance with a one-time funding fee, typically 2.15% to 3.30% of the loan amount, depending on down payment and usage history. That structure often makes this the most financially advantageous route for eligible buyers.

Veterans United points out that VA underwriting places significant weight on residual income, meaning the money left in your household budget after all debts and the mortgage are paid. Strong residual income can offset a higher debt load or a borderline score in ways conventional underwriting rarely allows. VA financing is a path more families in Jagoe markets qualify for than they realize.

USDA Loans

USDA loans offer 0% down payment for eligible properties in rural areas and apply to many communities in Indiana and Kentucky. The agency doesn’t publish a hard floor, but most lenders look for at least 640 for a smooth automated approval. Scores below that often require manual underwriting with stronger compensating factors.

There is an income limit: total household income cannot exceed 115% of area median income, and USDA counts all adult household members, not just the borrowers. For dual-income households, confirm eligibility before counting on this program. USDA charges a 1% upfront guarantee fee (usually financed) and a 0.35% annual fee paid monthly. Both are considerably less than FHA mortgage insurance for most borrowers.

Your loan type determines the floor. But once you’re in the room with a lender, your credit score isn’t the only number that matters.

Beyond the Score: What Else Do Lenders Look At?

TYour score gets you in the conversation. What lenders look at next determines the terms.

Payment history carries the most weight in FICO credit scores. A consistent record of on-time payments on your credit cards, auto loans, and other accounts signals reliability to underwriters. A late payment can stay on your credit report for up to seven years, though its impact fades over time when your recent behavior is clean.

The debt-to-income ratio is the other number lenders study closely. Add up your monthly debt payments and divide by your gross monthly income. Most conventional financing allows up to 45% DTI, sometimes 50% for borrowers with strong scores and reserves. FHA generally caps at 43% with some flexibility. VA uses a 41% guideline but makes exceptions for borrowers with strong residual income.

Employment stability matters too. Lenders prefer two years of consistent work history. The healthcare professionals, educators, and manufacturing workers who make up much of Jagoe’s buyer base typically have exactly the kind of steady employment record underwriters want to see.

Lenders pull your credit score from all three major credit bureaus (Equifax, Experian, and TransUnion) and use your middle score.

Score and payment history tell part of the story. The myths around credit scores can keep buyers from ever starting the conversation.

Common Credit Score Myths That Stop Buyers Before They Start

A few things about credit scores get more attention than they deserve. A few others don’t get enough.

“You need a 700+ score to qualify.” Most conventional mortgage loan programs require a 620 to get started. FHA financing allows 580 with 3.5% down. Plenty of buyers in the 620–680 range close on new homes every year. The score that gets you approved and the score that gets you the best rate are different numbers, but 700 isn’t the entry point most people assume it is.

“VA and USDA have no minimums, so anyone qualifies.” The agencies don’t set floors, but lenders do. Most require around 620 for VA and 640 for USDA. Scores below those thresholds usually mean manual underwriting with stronger compensating factors. That path is possible, but it requires a lender who knows how to work it.

“With 20% down, my score doesn’t matter.” A larger down payment eliminates PMI and improves approval odds, but it doesn’t neutralize a lower credit score. Your score still affects your interest rate, underwriting conditions, and sometimes eligibility for specific programs. Both numbers matter, and a lender looks at the full picture.

“FHA is only for first-time buyers or people with bad credit.” It isn’t. FHA is a fully legitimate option for move-up buyers with strong incomes who happen to have a blemish in their credit history. Many buyers choose it intentionally for its flexible DTI limits and more forgiving treatment of past credit events, not because they have no other options.

If your score isn’t exactly where you want it, there are a few targeted moves that make the biggest difference.

Practical Steps to Improve Your Credit Score Before Applying

Even a modest score improvement before you apply can reduce your monthly payment and save real money over the life of a 30-year loan. A few targeted actions make the biggest difference.

• Check your credit report for errors. All three credit bureaus are required to provide free annual reports at AnnualCreditReport.com. Errors happen more often than most people expect, and disputing inaccurate late payments or incorrect balances can move a score quickly.
• Pay down credit card balances. The credit utilization ratio (your balance relative to your credit limit) is one of the most responsive factors in your score. Bringing utilization below 30% of your total credit limit across your accounts makes a measurable difference. If you’re close to the limit on one card, prioritize that one first.
• Hold off on new applications. Every hard inquiry from a new credit card or loan application reduces your score by a few points and introduces new accounts that shorten your average credit history. Avoid opening new credit for at least six months before you plan to apply.
• Keep old accounts open. Closing cards you’re not using feels tidy, but it reduces your total available credit and can hurt your score unexpectedly. Leave them open.
• Protect your payment record. Set automatic minimum payments on every account. One accidental late mark on a small balance can stay on your credit report for years.

Meaningful financial health improvements typically take three to six months to fully reflect in your scores. If you’re currently in the 580–620 range and your move isn’t urgent, a focused credit-building period before applying can pay off in significantly better terms.

The effort is worth it. Here’s exactly what the difference in your score means for what you actually pay each month.

How Credit Score Affects Your Monthly Payment

The difference between a 620 and a 760 isn’t just about approval. It determines what you pay every month for the life of the loan.

Borrowers with scores of 760 or higher qualify for the most competitive rates. According to myFICO data, borrowers at that tier can save more than $56,000 in total interest on a $300,000 loan compared to those qualifying in the 620 range. The gap widens significantly as the loan amount grows. A 100-point drop in credit score can significantly increase your rate, and that increase shows up in every single payment.

PMI is risk-priced the same way. A buyer with 5% down and a 620 score pays substantially more in monthly mortgage insurance than the same buyer at 740. Both the rate difference and the insurance difference hit your payment simultaneously.

Your score isn’t just a qualifier. It determines how much home you can afford at a given monthly payment and shapes the long-term cost of the investment you’re making in your family’s future.

That’s the full financial picture. So where do you go from here?

Getting Started with New Home Financing in Indiana and Kentucky

Indiana buyers may benefit from programs through the Indiana Housing and Community Development Authority (IHCDA), which offers down payment assistance for eligible buyers. Kentucky buyers can explore resources through the Kentucky Housing Corporation (KHC). Both are worth a conversation with a lender who works specifically in your market.

Beyond that, most of what determines your path forward is already in your hands. Your score, your DTI, your payment history. None of it has to be perfect. It just has to work for the loan type that fits your situation, and for most families in Indiana and Kentucky, there’s a path that does.

The families who feel most ready going into that first lender conversation aren’t necessarily the ones with the highest scores. They’re the ones who understood what the numbers actually meant before they walked in the door.

Frequently Asked Questions About Mortgages for New Home Buyers

Financing a new home brings up a lot of questions, especially around credit. Here are answers to the ones families in Indiana and Kentucky ask most often.

An energy efficient Jagoe Home begins with intelligent design, quality construction, and generations of working to exceed our own standards of excellence. Jagoe Homes committed to all the practices it takes to build truly energy efficient homes, and we work closely with RESNET (Residential Energy Services Network) to achieve great ratings from that organization.

HERS® (Home Energy Rating System) INDEX

*Based on the US Department of Energy definition of HERS index of 130. This information presented for educational purposes only. Savings are average estimates based on Jagoe Homes’ top five selling plans. Savings will vary based on house type, orientation, house size, utility rates, climate and operations of the home.

The lower a home scores on RESNET’S HERS (Home Energy Rating) Index, the more energy efficient it is. A standard new home that’s built to meet the 2006 IECC will score a HERS Index of 100. New Jagoe homes score an average of 62, making them at least 38% more efficient than a standard new home and at least 68% more efficient than a used home.

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Financing Your New Home Build, Simplified

Need answers fast? Our Jagoe Acrisure Financing Team is located in Owensboro, Kentucky, and has the resources and staff to get you into your new Jagoe Home. We work closely with you, combining expertise and advanced tools to make navigating your home loan process simple and seamless. Whether you’re ready to build a house on your land now or just exploring financing options, we are committed to helping you achieve your goals quickly and effectively. Our team is committed to getting you started with a stress-free experience from start to finish.

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