What Credit Score Do You Really Need for a Mortgage in 2025? Lender-by-Lender Breakdown

A borrower called me frustrated last week: “I have a 665 credit score. Fannie Mae says they approve 620 and above for conventional loans, so why did three banks deny my application?”

This is the credit score confusion that costs thousands of borrowers their dream homes every year. There’s the program minimum (what Fannie Mae, FHA, or VA requires) and then there’s the lender minimum (what each bank or broker actually approves). These two numbers can be 40-60 points apart.

Understanding this gap—and knowing which lenders approve scores closer to program minimums—is the difference between getting approved at 6.5% with one lender or being denied entirely by another lender offering 6.0%.

Let me break down exactly what credit score you need for each loan type, which lenders approve which ranges, and how to position yourself for approval even with a middle-range score that some lenders would deny.

The Credit Score Mythology vs. Reality

When you Google “What credit score do I need for a mortgage?” you’ll find articles saying:

• Conventional loans: 620 minimum
• FHA loans: 580 minimum (3.5% down) or 500 minimum (10% down)
• VA loans: No official minimum
• USDA loans: 640 minimum

These are program minimums—the floor set by Fannie Mae, FHA, the VA, or USDA. But here’s what those articles don’t tell you: most lenders add 20-60 points to these minimums through internal policies called “overlays.”

Why Lenders Add Overlays

Lenders add credit score overlays for several reasons:

1. Risk management: They don’t want loans that default, even if Fannie Mae allows them
2. Pricing protection: Lower scores mean higher default risk and tighter profit margins
3. Portfolio performance: Lenders selling loans to investors want strong statistics
4. Automated underwriting: Some lenders only use automated systems that require higher scores

So while Fannie Mae allows 620, your bank might require 660 or 680 for conventional loans. While FHA allows 580, many lenders require 620 or 640.

This is perfectly legal—lenders can set whatever internal standards they want. But it means the “official” minimums are almost useless for predicting whether you’ll get approved.

Conventional Loan Credit Scores: The 620-740 Reality

Official Fannie Mae/Freddie Mac minimum: 620

What lenders actually require:

Big Banks (Chase, Wells Fargo, Bank of America)

• Practical minimum: 660-680
• Competitive pricing: 700+
• Best rates: 740+

Big banks rarely approve 620-660 scores even though Fannie Mae allows them. When they do, expect:

• Massive rate premiums (add 1%-2% to the base rate)
• Higher fees and points
• Maximum 80% LTV (20% down payment required)
• Severe DTI restrictions (often 43% max instead of 50%)

I’ve seen Chase quote 7.25% for a 640-score borrower when their 740+ rate was 5.875%. That’s a 1.375% penalty just for credit score.

Credit Unions

• Practical minimum: 640-660 (much better than banks)
• Competitive pricing: 680+
• Best rates: 720+

Credit unions are significantly more flexible on middle-range scores. Many credit unions will:

• Manually underwrite 640-660 scores
• Approve 95% LTV (5% down) at 660+ scores
• Offer rate premiums of 0.5%-0.75% instead of 1.5%-2%
• Consider compensating factors (stable income, low DTI, high reserves)

Real example: A credit union approved a 655-score borrower at 6.625% when big banks quoted 7.5%-8.0% or denied the application outright.

Mortgage Brokers (accessing wholesale lenders)

• Practical minimum: 620-640 depending on the wholesale lender
• Competitive pricing: 680+
• Best rates: 740+

Mortgage brokers have access to 20-50 wholesale lenders with different overlays. Some wholesale lenders approve:

• 620 scores with 10% down and strong compensating factors
• 640 scores with 5% down and DTI below 45%
• 660 scores with 3% down (standard guidelines)

Brokers shop your scenario to find which of their lenders has the loosest overlays for your specific profile. If you have a middle credit score around 640-680, brokers are often your best option for approval.

Online Lenders (Rocket, Better.com)

• Practical minimum: 640-660
• Competitive pricing: 700+
• Best rates: 740+

Online lenders fall between big banks and credit unions. They have automated underwriting that’s less flexible than manual underwriting, but they’re not as conservative as big banks. Expect:

• 640-660 minimum for approval
• 5%-10% down requirement at lower scores
• Digital-first process that’s less forgiving of complicated credit scenarios

FHA Loan Credit Scores: The 580-640 Reality

Official FHA minimum: 580 with 3.5% down, or 500 with 10% down

What lenders actually require:

Big Banks

• Practical minimum: 640-660
• Competitive pricing: 660+

Big banks barely participate in low-credit FHA lending anymore. Most big banks:

• Won’t approve below 640 even though FHA allows 580
• Charge severe rate premiums for 640-680 scores
• Require significant compensating factors (low DTI, high reserves, stable employment)

If you have a 580-620 credit score, don’t waste time applying to big banks for FHA loans. They’ll deny you or quote rates so high you’d be better off improving your credit and trying again in 6 months.

FHA Specialists (through mortgage brokers)

• Practical minimum: 580-600 (matching FHA guidelines)
• Competitive pricing: 620+

This is where FHA loans shine. Specialty lenders accessed through mortgage brokers will:

• Approve 580 scores with 3.5% down (FHA minimum)
• Approve 600-620 scores with no rate premium beyond standard FHA pricing
• Manually underwrite borderline scenarios with strong compensating factors
• Work with borrowers rebuilding credit after bankruptcy/foreclosure

Real example: A borrower with a 595 score, 24 months since bankruptcy discharge, and stable $55,000 W-2 income got approved for an FHA loan at 6.875% through a broker’s specialty lender. Big banks denied him outright.

Credit Unions (FHA programs)

• Practical minimum: 600-620
• Competitive pricing: 640+

Credit unions fall in the middle—better than big banks, but not as flexible as FHA specialists. Most credit unions:

• Approve 600-620 scores with manual underwriting
• Require strong compensating factors at lower score ranges
• Offer member-focused service and reasonable pricing

If you have a 620-640 score and want the personal service of a credit union, FHA through a local credit union can be excellent. Below 620, use a broker to access FHA specialists.

Online FHA Lenders

• Practical minimum: 620-640
• Competitive pricing: 660+

Online lenders mostly use automated underwriting, which limits flexibility at lower scores. They’re competitive for 640+ scores but rarely approve below 620.

VA Loan Credit Scores: The “No Minimum” Myth

Official VA minimum: None stated

What lenders actually require:

The VA itself doesn’t set a minimum credit score—they guarantee loans for qualifying veterans regardless of credit. But lenders absolutely have minimums because they’re taking the risk of default even with VA guarantee.

Big Banks

• Practical minimum: 640-660
• Competitive pricing: 680+

Big banks treat VA loans like conventional loans with respect to credit overlays. Expect:

• 640-660 minimum for approval
• Rate premiums for scores below 700
• Significant overlays on residual income calculations

VA Specialists (through brokers)

• Practical minimum: 580-600
• Competitive pricing: 620+

VA specialists accessed through mortgage brokers are the most flexible:

• Approve 580-600 scores with manual underwriting
• Focus on residual income (VA’s preferred metric) rather than just credit score
• Work with veterans with recent credit events
• Understand VA-specific guidelines better than generalist lenders

If you’re a veteran with a 580-640 score, use a mortgage broker with access to VA specialists. They’ll find lenders who approve scores that big banks automatically deny.

Credit Unions with VA Programs

• Practical minimum: 600-620
• Competitive pricing: 640+

Credit unions with strong military community ties often have excellent VA programs:

• 600-620 approvals with manual underwriting
• Competitive pricing for 640+ scores
• Understanding of military income (BAH, BAS, hazard pay)

USDA Loan Credit Scores: Rural Lending Requirements

Official USDA minimum: 640 for automated underwriting, lower for manual

What lenders actually require:

USDA Specialists

• Practical minimum: 620-640
• Competitive pricing: 660+

USDA loans have less variation because fewer lenders do them and guidelines are stricter:

• Most lenders require 640 minimum
• Some allow 620-640 with manual underwriting
• Below 620 is very difficult even with strong income

If you’re pursuing USDA financing with a sub-640 score, work with a broker who has USDA specialty lenders.

The Middle FICO Score Rule: Why Your Credit Report Scores Don’t Matter

Here’s a critical detail most borrowers don’t understand: lenders don’t use the credit score you see on Credit Karma or your credit card app.

Lenders pull a tri-merge credit report with FICO scores from:

• Experian
• TransUnion
• Equifax

They use your middle score (not average, not highest—the middle score) for qualification.

Example:

• Experian: 720
• TransUnion: 685
• Equifax: 690

Your middle score is 690—that’s what the lender uses for rate pricing and approval decisions, even though one bureau shows you at 720.

Why this matters:

1. You might qualify at a different tier than you think: Thinking you have 720 when your middle score is 690 means you’re shopping for the wrong rate tier
2. VantageScore ≠ FICO: Credit Karma shows VantageScore 3.0, not FICO. These can differ by 20-40 points
3. Cleaning up one bureau isn’t enough: You need to address issues on all three bureaus since lenders use the middle

Before you apply for a mortgage, pull a true tri-merge credit report or ask a lender to run your credit so you know your actual middle FICO score. Don’t guess based on Credit Karma.

Score-Based Rate Pricing: The Cost of Every 20 Points

Lenders price loans in 20-point credit score tiers. Here’s approximately how much each tier costs on a $300,000 conventional loan:

These are approximations—actual pricing varies by lender, LTV, and market conditions. But the pattern is clear: every 20-point drop in credit score costs you roughly 0.25%-0.5% in rate, which translates to thousands of dollars over the loan life.

If you’re in the 680-720 range, spending 3-6 months improving your score by 20-40 points can save you $30,000-$50,000 over 30 years. That’s a phenomenal ROI for paying down credit cards, disputing errors, and being patient.

Compensating Factors: How to Get Approved with Lower Scores

If your credit score is below lender preferences but you have strong compensating factors, manual underwriting can still get you approved:

1. Low Debt-to-Income Ratio (DTI)

If your DTI is below 36% (ideally below 30%), lenders will approve lower credit scores:

• 640 score + 28% DTI might get approved when 640 score + 45% DTI gets denied
• Shows you have plenty of income cushion to handle the mortgage payment
• Particularly important for FHA loans where DTI matters more than conventional

2. Large Down Payment

Putting 15%-20% down instead of 3%-5% makes lenders more comfortable with middle credit scores:

• 640 score + 20% down gets much better pricing than 640 score + 5% down
• Lower LTV = lower risk for the lender
• May reduce rate premium by 0.25%-0.5%

3. Substantial Cash Reserves

Having 6-12 months of mortgage payments in savings after closing shows financial stability:

• 640 score + $40,000 reserves looks much better than 640 score + $5,000 reserves
• Demonstrates you can handle unexpected expenses without missing payments
• Particularly helpful for self-employed borrowers or those with variable income

4. Stable Employment History

2-5+ years with the same employer or in the same industry strengthens applications:

• 640 score + 5 years same employer beats 680 score + 4 jobs in 3 years
• Shows income reliability even if credit history has blemishes
• Especially important after credit events (bankruptcy, foreclosure)

5. Strong Rental/Housing Payment History

If you’ve paid rent on time for 12-24 months, lenders may overlook credit card late payments:

• 640 score + 24 months perfect rent history demonstrates you prioritize housing payments
• Can be documented through bank statements or landlord letters
• Some lenders consider this more important than revolving credit history

How to Find Lenders That Approve Your Credit Score

Here’s the step-by-step process to find lenders that actually approve your specific credit score range:

Step 1: Get Your Tri-Merge Credit Report

• Ask a mortgage broker or lender to pull your credit (soft pull or full pull)
• Identify your middle FICO score from Experian, TransUnion, Equifax
• Review for errors and dispute anything inaccurate immediately

Step 2: Identify Your Loan Type

• 740+ score: Shop for the best rate across all lender types
• 680-739 score: Compare brokers, credit unions, and online lenders
• 620-679 score: Focus on mortgage brokers with flexible wholesale lenders and credit unions
• 580-619 score (FHA): Use mortgage brokers accessing FHA specialists
• Below 580: Wait 6-12 months and improve credit before applying

Step 3: Ask Lenders About Overlays BEFORE Applying

When shopping, ask:

• “What’s your minimum credit score for [conventional/FHA/VA] loans?”
• “Do you have overlays above Fannie Mae/FHA minimums?”
• “What compensating factors help approve middle-range scores?”
• “Can you manually underwrite if automated underwriting declines?”

Big banks will tell you 680-700 minimums. Credit unions will say 640-660. Brokers will say “it depends on the wholesale lender, but we have options for 620+.”

Step 4: Compare Multiple Lender Types

Submit applications to:

• 2 mortgage brokers (to access different wholesale lender networks)
• 1-2 local credit unions (for flexible underwriting)
• 1 online lender (for rate comparison at 640+ scores)

Skip big banks unless you have 700+ scores or special relationship pricing.

Step 5: Negotiate Based on Your Strengths

If you have compensating factors, emphasize them:

“I know my 655 score is below your typical range, but I have 15% down, a 32% DTI, and $35,000 in reserves. Can your underwriters manually review my file?”

Many lenders have flexibility to approve strong overall profiles even with lower credit scores—you just have to ask.

Credit Score Improvement: Is It Worth Waiting?

If your score is 640-680 and you can realistically reach 700+ in 3-6 months, the savings often exceed $40,000-$60,000 over the loan life.

Fast credit improvement strategies:

1. Pay down credit cards below 30% utilization (ideally below 10%): Adds 20-40 points within 30 days
2. Dispute credit report errors: Can add 20-50 points within 60 days if successful
3. Become an authorized user on someone’s excellent credit card: Adds 10-30 points within 60 days
4. Pay off collections under $500: Small collections hurt scores disproportionately
5. Wait for old late payments to age: Late payments lose impact after 12-24 months

If you can improve from 680 to 720 in 4 months, you’ll save:

• $63/month in mortgage payments ($1,890/year)
• $22,680 in interest over 30 years
• Plus lower fees and better approval odds

That’s worth waiting unless you’re in a time-sensitive buying situation.

The Bottom Line: Match Your Score to the Right Lender

The credit score you need for a mortgage in 2025 isn’t a single number—it’s a spectrum depending on lender type:

• Big banks: 660-680 practical minimum, 700+ for competitive pricing
• Credit unions: 640-660 practical minimum, 680+ for competitive pricing
• Mortgage brokers: 620-640 practical minimum (depending on wholesale lender), 680+ for competitive pricing
• Online lenders: 640-660 practical minimum, 700+ for competitive pricing

If you have a middle credit score between 620-700, mortgage brokers and credit unions are your best options. Brokers have access to wholesale lenders with minimal overlays, while credit unions offer manual underwriting flexibility.

If you have 700+ scores, shop everywhere—you’ll qualify with all lender types, so focus on finding the best rate and lowest fees.

If you’re considering a cash-out refinance, be aware that credit score requirements are often 20-40 points higher than purchase loans (lenders see cash-out as higher risk).

Most importantly: don’t assume you’re denied because your score is below 700. The right lender with the right underwriting flexibility can approve scores that would get denied elsewhere—you just have to know where to look.