How much of a home loan can I get with a 650 credit score?

Imagine you’ve made most of your monthly payments on time and haven’t taken on more credit than you can manage. As a result, your credit score is a solid 650 or so — a respectable “Fair” according to major bureaus like Experian and Equifax. Still, it’s not quite perfect, which might have you wondering how much of a home loan you can get with a 650 credit score.

Below, find out what options you have available, potential interest rates, and tips for getting approved with good terms.

Is 650 a good credit score to buy a house?

If you’re worried about affording a house with your credit profile, don’t sweat. Understanding how your credit is scored can help you see where you fall. The three major credit bureaus — Equifax, Experian, and TransUnion — grade borrowers’ creditworthiness using a model called the FICO**®** score. This model incorporates factors like payment history, total debt, and credit utilization to give lenders a score they can use when evaluating applications. Each score range corresponds to a specific grade. The breakdown looks like this:

— Poor credit: 300–579

— Fair credit: 580–669

— Good credit: 670–739

— Very good credit: 740–799

— Exceptional credit: 800–850

At 650, you’re right in the middle of the “Fair” category, which gives you plenty of options. The minimum credit score many conventional loan providers want to see is 620. Since you’re in the upper range of the “Fair” category, you’re well above that baseline. Government-backed mortgages like Federal Housing Administration (FHA) and Veterans Affairs (VA) loans are even more flexible.

What are the mortgage rates for a credit score of 650?

While your credit score gives you a wide range of loan options, your interest rates will be higher than those of borrowers with higher scores. The table below outlines the current rates for a $350,000 loan with a 30-day rate lock.

A typical 650 credit score mortgage rate, then, should be in the ballpark of 7.4%. On paper, this might not look all that much higher than the roughly 7% that borrowers in the upper ranges can get. But even a difference of a few tenths of a percent can add up significantly over the life of your loan. That’s why it helps to compare lenders who offer competitive rates tailored to you.

Better provides personalized interest rates to borrowers, and we don’t make you jump through hoops to see your offer. Get pre-approved in as little as three minutes with our simple online application to find out how we can help.

...in as little as 3 minutes – no credit impact

What other factors affect mortgage rates?

Your credit report isn’t the only element of your profile that lenders look at when evaluating a mortgage application. Other factors include:

— Loan term: A shorter loan term, like 15 years, usually comes with lower interest rates. This is because the lender’s money is tied up for less time, which reduces the risk of loss if the borrower can’t repay. 

— Down payment size: Conventional mortgage lenders typically prefer a down payment of at least 20%. If you contribute less, be prepared to pay private mortgage insurance and potentially a higher interest rate.

— Debt-to-income (DTI) ratio: This is the percentage of your monthly pretax income that goes toward existing debts. A higher DTI signals to lenders that you may struggle to make your mortgage payments down the line, which can lead to higher interest rates.

What loan options are available for a 650 credit score?

If you’re looking for a mortgage, a credit score of 650 opens the doors to all the most common types. Here’s a look at your main options and some of their pros and cons.

Conventional loans

Private lenders offer conventional loans not backed by the government. That means each lender has its own requirements and credit score thresholds.

With a credit score of 650, you can get a conventional loan. In fact, many lenders require a minimum of 620, so you should have no problem finding one if your DTI and down payment meet their standards. Of course, you’ll still likely face higher rates than borrowers with greater scores.

FHA loans

FHA loans are government-backed mortgages for low to moderate-income borrowers. The minimum credit score is 580 if you can make a down payment of at least 3.5%. You may be able to get a more favorable interest rate with an FHA loan, but you could also face higher fees and closing costs.

VA loans

VA loans offer mortgages to eligible veterans and surviving spouses of veterans. They’re appealing because you can put down as little as 0% and avoid mortgage insurance. A potential downside of taking out a VA loan is the funding fee, charged as a percentage of the loan amount. VA home appraisals may also require more steps than conventional loans. 

USDA loans

United States Department of Agriculture (USDA) loans also target low to moderate-income borrowers, but people must reside in an eligible rural area. There’s no mandated minimum credit score, but some lenders prefer 640 or higher to qualify for the USDA’s automated underwriting system, which can speed up the process significantly.

Pros and cons of getting a home loan with a 650 credit score 

Buying a house with a 650 credit score may or may not be a good idea for your financial situation. Here are the key advantages and drawbacks to consider before making a decision.

Pros

— Build credit: Making mortgage payments on time and consistently helps you grow your credit and may qualify you for better terms in the future.

— Refinance later: If your credit score improves, you can refinance to a lower or more favorable loan option.

— Negotiate terms: With a score that meets common loan requirements, you can shop around and negotiate rates to secure the best deal. 

Cons

— Pay higher interest: Even if you carefully compare lenders before accepting an offer, your rate will likely be higher than borrowers with “Good” or “Excellent” scores.

— Face stricter underwriting: Lenders may scrutinize your credit profile more carefully, which can lengthen the approval process.

— Provide a larger down payment: Some lenders ask for a bigger down payment to offset the higher risk associated with lower credit scores.

How to increase your credit score

If you plan to buy in the future, improving your credit profile now can help you get lower interest rates and more favorable terms when the time comes. Here’s how to do it:

— Make all your monthly payments on time: Payment history has the biggest impact on your credit score, so use autopay and set reminders to stay on track.

— Reduce existing debts: Paying down your debt burden lowers your credit utilization ratio, which can help improve your score. Focus on high-interest accounts like credit cards and personal loans first.

— Limit new debt: Applying for new credit can temporarily drop your score a few points. So, unless necessary, hold off on taking out other loans until after you secure a mortgage.

— Monitor your credit report: Keep an eye on your credit report and notify the bureaus immediately if anything seems off, such as debt collection calls and errors in your personal information.

— Keep old accounts open: The length of your credit history directly influences your score. Therefore, leaving old accounts open gives lenders a longer track record of managing credit responsibly.

Fair financing for fair credit: The Better way to buy a home

Understanding your loan options can help you secure the best mortgage terms for your situation. No matter your score, managing debt and planning ahead puts you in a stronger position to get favorable rates and reach your homeownership goals. 

For borrowers looking to explore their options, Better is here to help. We offer conventional, FHA, and VA loans with competitive rates and a transparent application process. Get pre-approved in as little as three minutes and see your personalized loan options instantly.

Get started with no commitment to find out how much you could save on your mortgage with Better.

...in as little as 3 minutes – no credit impact

FAQ

How much of a home loan can I get with a 650 credit score?

For conventional loans, there’s no fixed limit to how much you can take out with a credit score of 650. Lenders will look at factors like your income and DTI to decide. Government-backed programs, like the VA and FHA, may have specific caps in place.

Can I get a home loan with a 650 credit score?

Absolutely. Many lenders are happy to work with homebuyers with “Fair” credit, whether that’s through a conventional option or a government-backed program. In addition to your score, your interest rate will depend on factors like market conditions and your DTI.

What loans can I get with a 650 credit score?

A credit score of 650 gives you access to all the major mortgage options, including conventional, FHA, and USDA loans.