Mortgages and Credit: What You Need to Know Before You Buy

Buying a home is one of the biggest financial steps you’ll ever take—and your credit score plays a leading role in how smoothly that process goes. Before you apply for a mortgage, it’s essential to understand how lenders evaluate your credit and what you can do to strengthen your chances of approval. Let’s walk through how credit impacts mortgage decisions—and what steps you can take to prepare.

1. Minimum Credit Scores for Different Loans

Not all mortgages are the same, and different loan types have different credit requirements:

• Conventional Loans: Typically require a 620+ score

• FHA Loans: Minimum score around 580 (lower down payments)

• VA Loans: Usually 620+, but varies by lender

• USDA Loans: Often require 640+

Higher credit scores can lead to lower interest rates and better terms, potentially saving you thousands over the life of the loan.

2. What Lenders Look For

Your credit score is just one piece of the puzzle. Lenders also examine:

• Payment history

• Debt-to-income ratio (DTI)

• Length of credit history

• Types of credit in use

• Recent inquiries

💡 Tip: Aim for a DTI below 36% and a stable payment history of at least 12 months.

3. How to Prepare Your Credit Before Applying

✅ Check your credit reports for errors and dispute anything inaccurate.
✅ Pay down credit card balances to reduce utilization.
✅ Avoid opening new credit accounts in the 3–6 months before applying.
✅ Stay current on all bills—one late payment can set you back.

Even small improvements can make a big difference in the terms you’re offered.

4. Get Pre-Approved the Smart Way

Pre-approval gives you a clear picture of how much home you can afford and shows sellers you're serious. Choose a lender that offers soft-pull pre-approvals so it doesn’t impact your credit score.

Final Thoughts

When it comes to buying a home, your credit can be your greatest asset—or your biggest hurdle. Take the time to understand your report, strengthen your score, and position yourself for success.

At InvestUp, we help you prepare for big milestones like homeownership by optimizing your credit and giving you a clear, confident path forward.