What Credit Score Do You Need for a Conventional Loan?

For a conventional loan, most lenders want a minimum FICO score of 620 on a fixed-rate mortgage and 640 on an adjustable-rate mortgage.¹ That 620 threshold is the floor to qualify, but the credit score you need for a conventional loan in practice depends on what you want the loan to cost. Your score sets your interest rate, your private mortgage insurance premium, and how small a down payment the lender will accept. A borrower at 780 and a borrower at 620 can walk into the same lender’s office and walk out with wildly different loans.

The 620 Minimum and Where It Bends

A conventional loan is a mortgage that isn’t insured or guaranteed by a federal agency. It follows guidelines set by Fannie Mae and Freddie Mac, which buy the loans on the secondary market. The 620 minimum comes from Fannie Mae’s selling guide and applies when your application is approved through an automated underwriting system.¹

If your file has to be reviewed manually, the bar climbs. Manual underwriting requires a 680 score if you’re borrowing 75 percent or less of the home’s value, and a 720 score if you’re borrowing more than that.²

Then there are lender overlays. Fannie Mae and Freddie Mac set the outer limit, but individual lenders often layer on their own standards, requiring 640 or 660 before they’ll approve a conventional loan. If your score is below 620, you’ll either need to raise it or look at government-backed options. FHA loans accept scores as low as 500 with a larger down payment.³

How Your Score Changes the Price

Qualifying is only the first question. The bigger one is what the loan will cost, and that turns on Fannie Mae’s Loan-Level Price Adjustments (LLPAs). LLPAs are fees expressed as a percentage of your loan amount, based on your credit score paired with your down payment. You can pay them upfront at closing or bake them into a higher interest rate for the life of the loan.⁴

On a purchase loan with a 20 percent down payment (75.01 to 80 percent LTV) and a term longer than 15 years, Fannie Mae’s current matrix charges:

780 or higher: 0.375 percent of the loan amount
740 to 759: 0.875 percent
660 to 679: 1.875 percent
639 or lower: 2.750 percent

On a $350,000 loan, the gap between a 780 and a 639 works out to roughly $8,312 in upfront fees.⁴ Rolled into the rate instead, that same difference becomes tens of thousands of dollars in extra interest across a 30-year mortgage. Borrowers above 740 land in the best pricing tiers. Borrowers near the 620 floor pay noticeably more for the same money.

Credit Score and Private Mortgage Insurance

If your down payment is under 20 percent, your conventional loan will carry private mortgage insurance (PMI). PMI protects the lender if you stop paying, not you.⁵ Your credit score is one of the main inputs into the annual premium.

A borrower above 760 generally pays a PMI rate well below one percent of the loan amount per year. A borrower near 620 can pay well above one percent for the same coverage. On a $300,000 loan, that spread can add more than $200 to your monthly housing cost. Because PMI drops off only after your loan balance reaches 78 to 80 percent of the home’s original value, that premium follows you for years.⁶

What Happens When Two People Apply

Applying with a spouse or co-borrower doesn’t average your scores together. Fannie Mae tells lenders to find each borrower’s applicable score first — the middle of three scores, or the lower of two — and then use the lowest of those as the representative credit score for the whole loan.⁷

The consequence is direct. If one applicant has a middle score of 760 and the other has 640, the loan is priced at 640. Some couples respond by leaving the lower-scoring borrower off the application, but the lender then can’t count that person’s income toward qualification either.

Manually underwritten loans work differently. For those, the lender may use the average of the borrowers’ median scores. Two borrowers with medians of 605 and 693 would be evaluated against 649.⁷

Score, Down Payment, and DTI Work Together

The minimum down payment on a conventional loan for a primary residence is 3 percent, corresponding to a 97 percent LTV.⁸ The catch is that credit score requirements tighten as your down payment shrinks. And LLPA fees rise steeply when a low score meets a small down payment, so a 620 borrower putting 3 percent down pays much more than a 620 borrower putting 20 percent down.

Your debt-to-income (DTI) ratio matters alongside your score. DTI compares your total monthly debt payments, including the new mortgage, to your gross monthly income. Automated underwriting through Fannie Mae generally caps DTI at 50 percent. Manual underwriting at the 620 credit score floor caps it at 45 percent.²

A lower DTI gives a borderline score more room to work. Paying off a car loan or a card balance before you apply can lower your DTI and improve your credit utilization at the same time, and sometimes that combination is enough to move you into a cheaper LLPA tier.

If You’ve Had a Bankruptcy, Foreclosure, or Short Sale

Hitting 620 isn’t enough on its own if a recent significant credit event sits on your record. Fannie Mae enforces mandatory waiting periods measured from the date the event was completed, discharged, or dismissed:⁹

Chapter 7 bankruptcy: four years from discharge or dismissal, reduced to two years with documented extenuating circumstances such as a serious medical event or job loss.
Chapter 13 bankruptcy: two years from discharge, or four years from dismissal. The two-year post-discharge period can’t be shortened.
Foreclosure: seven years from completion, reduced to three years with documented extenuating circumstances. During the shortened window, LTV is capped at 90 percent and the purchase must be a primary residence.
Short sale or deed-in-lieu: four years from completion, reduced to two years with documented extenuating circumstances.

Until the full seven-year foreclosure waiting period is over, a conventional loan can’t be used to buy a second home, buy an investment property, or do a cash-out refinance.⁹

Raising Your Score Before You Apply

Because a small score bump can drop you into a cheaper LLPA tier and lower your PMI, a few months of preparation is often worth more than a few months of house hunting. The moves that actually change your score:

Pull your credit reports from all three bureaus at AnnualCreditReport.com and dispute errors with the bureau reporting them. Removing a wrongly reported late payment or an account that isn’t yours can produce a fast improvement.
Pay down revolving balances. Utilization under 30 percent helps; under 10 percent helps more.
Pay every bill on time. Payment history carries the most weight, and a single missed payment can drop your score sharply.
Don’t open new accounts. Each hard inquiry costs a few points, and new accounts pull down the average age of your credit.
Keep old cards open. Closing one shrinks your available credit and pushes your utilization ratio up.

None of this works overnight. Starting three to six months before you plan to apply gives the changes time to post to your credit file and show up in the scores your lender pulls. When the lender does pull, mortgage inquiries from multiple lenders within a 45-day window count as a single inquiry, so shopping several lenders for the best rate won’t compound the hit to your score.¹⁰

1
Fannie Mae. General Requirements for Credit Scores
2
Fannie Mae. Eligibility Matrix
3
U.S. Department of Housing and Urban Development. Does FHA Require a Minimum Credit Score and How Is It Determined
4
Fannie Mae. LLPA Matrix
5
Consumer Financial Protection Bureau. What Is Private Mortgage Insurance
6
Federal Reserve Board. Homeowners Protection Act of 1998
7
Fannie Mae. Determining the Credit Score for a Mortgage Loan
8
Fannie Mae. FAQs 97 Percent LTV Options
9
Fannie Mae. Significant Derogatory Credit Events Waiting Periods and Re-establishing Credit
10
Consumer Financial Protection Bureau. What Happens When a Mortgage Lender Checks My Credit