What Credit Score Do You Really Need to Buy a Home in 2025?

By Jeff Hernandez, Realtor & Attorney — The Connie Colla Group at RETSY

Buying a home is one of life’s most exciting milestones, but for many, it also brings uncertainty. One of the most common questions I hear from clients is: “Is my credit score good enough to qualify?”

If you’ve wondered the same thing, you’re not alone. According to Fannie Mae’s Consumer Mortgage Understanding Study, only 32% of consumers correctly identified the minimum credit score required to buy a home, meaning most overestimate or simply don’t know. For down payments, the knowledge gap is even wider; 90% of consumers misunderstand the minimum required.

This lack of clarity often discourages buyers from even starting their search. Over the years, I’ve met many clients in Phoenix, Scottsdale, and Paradise Valley who assumed their credit wasn’t strong enough, only to discover they were already well-qualified. Let’s clear up the myths and look at what the data in 2025 really tells us.

No Single “Magic Number” Exists

Many buyers believe there’s one universal credit score that guarantees approval. The truth is, there’s no one-size-fits-all cutoff.

Every lender has its own criteria. Some place heavier emphasis on FICO Scores, others use VantageScore®, and most weigh additional factors such as your income stability, debt-to-income ratio, and down payment size.

As FICO explains, there is no single cutoff score used by all lenders. This means a buyer with a 640 score might be approved by one lender and denied by another. Flexibility exists, which is why working with an experienced Realtor® and a trusted lender can make all the difference.

Minimum Credit Score Requirements by Loan Type

Different loan programs have different thresholds. Here’s what lenders typically require in 2025:

• Conventional Loans (Fannie Mae): Minimum 620 credit score requirement
  
  
• FHA Loans (HUD): 580+ credit score for 3.5% down and 500–579 credit score with 10% down; below 500 not eligible
  
  
• VA Loans: No VA-set minimum score, though many lenders prefer ~620+ credit score
  
  
• USDA Loans: A 640 credit score earns an automated “Accept” status; lower scores require manual underwriting
  
  
• Jumbo Loans: Typically 700–760 credit score, reflecting stricter lender risk standards

What Scores Buyers Actually Have (Medians and Averages)

The reality is that successful homebuyers often close with scores higher than the minimum. 

Here’s what recent data shows:

• Average mortgage borrower score (Q2 2024): 758 credit score according to Experian
  
  
• Average FHA borrower score (FY 2024): 677 credit score reported by HUD
  
  
• Average score among purchase loans (May 2025): 738 credit score from ICE Mortgage Monitor
  
  

So, while FHA buyers typically have lower scores, conventional and jumbo borrowers tend to have higher scores.

How Credit Score Affects Your Mortgage Rate

Even if you meet the minimum requirements, your score directly influences your mortgage rate and terms.

As of January 2025, The Mortgage Reports about Current Mortgage Rates by Credit Score | 2025 showed:

• 620–639 credit score: 7.838% APR
  
  
• 760–850 credit score: 7.242% APR
  
  

That 0.6% spread may not sound like much; but on a $403,000 loan over 30 years, it adds up to nearly $59,000 more in interest.

To know how much you can save if you have a high FICO Score, use this Loan Savings Calculator by myFICO.

Think of your credit score as your silent financial partner. It doesn’t speak, but it dictates how hard your money has to work for you over time.

The New Reality: VantageScore 4.0 Adoption in 2025

Big changes are underway. In July 2025, the Federal Housing Finance Agency (FHFA) announced that lenders may now use VantageScore 4.0 (or Classic FICO) for loans sold to Fannie Mae and Freddie Mac.

This update matters because:

• VantageScore 4.0 incorporates alternative data like rent and utility payments.
  
  
• VantageScore research shows it can generate scores for 33 million more Americans, with about 5 million now mortgage-ready who previously were not.
  
  

For younger buyers and renters with consistent payment histories but limited credit cards, this change could be a game-changer.

How to Improve Your Score Before Buying

If your score isn’t where you’d like it to be, don’t worry; there are actionable steps you can take.

The Federal Reserve, CFPB, and myFICO recommend the following:

1. Pay bills on time. Payment history makes up 35% of your FICO® Score.
   
   
2. Reduce credit utilization. Keep usage below 30% of available credit.
   
   
3. Check reports for errors. Dispute inaccuracies with the credit bureaus.
   
   
4. Avoid new credit applications. Each hard inquiry can lower your score.
   
   
5. Save for a larger down payment. Extra cash can offset a lower score.

Final Thoughts

Your credit score is important, but it’s only one piece of the puzzle. Income, savings, debt, and even new scoring models all shape how lenders view you.

The key takeaway: you don’t need perfect credit to buy a home. What you do need is the right guidance, the right strategy, and the confidence to take the first step.

Over the decades I've spent in Arizona, I’ve seen clients from all walks of life achieve their dream of homeownership, even when they thought the odds were stacked against them.

If you’re considering buying in Scottsdale or Phoenix’s luxury market, I encourage you to connect with someone who understands both the financial and legal side of real estate. For trusted, personalized guidance, reach out to:

Jeff Hernandez, Esq., Scottsdale Real Estate Agent & Attorney — your trusted guide through Arizona’s luxury real estate market. For personalized advice, call me directly at (602) 550-1114 to start the conversation.