One question that concerns many is whether their credit score is strong enough to qualify for a mortgage.

Today's stricter lending standards can be a challenge for some and still, many buyers might be surprised at the options that are available for borrowers with lower credit scores.

The average American has seen their credit score go up in recent years, and this is a great sign of financial health and movement toward a stronger financial future.

More Americans with rising credit status are entering the housing market; the graph below indicates the organic increase in the FICO score distribution of home loans.

For one with a credit score below 750, this graphic may still equal evidence that they may not qualify for a mortgage, but this is not always the case. While most borrowers do have a credit score of at least 750, there is more to qualifying for a mortgage than just the credit score.

There are options that allow those with lower credit scores to buy their dream home. According to Experian, a global leader in consumer and business credit reporting, the following options can offer optimism:

  • Federal Housing Administration (FHA) loans: “With a 3.5% down payment, homebuyers may be able to get an FHA loan with a 580 credit score or higher. If you can manage a 10% down payment, though, that minimum goes as low as 500.”
  • Conventional Loans: “The most popular loan type typically comes with a 620 minimum credit score." 
  • S. Department of Agriculture (USDA) loans: “In general, lenders require a minimum credit score of 640 for a USDA loan, though some may go as low as 580.”
  • S. Department of Veterans Affairs (VA) loans: “VA loans don’t technically have a minimum credit score, but lenders will typically require between 580 and 620.”

At a time when lending is relatively tight, a higher credit score will in fact offer more options and better terms when applying for a mortgage and, it is wise not to rule oneself out if their score is less than perfect.

Today’s market is full of opportunity, and speaking to an experienced real estate expert about improving a credit score will increase options. Most important is not allowing misconceptions about the strength of credit score to pre-empt homeownership dreams; a professional is an excellent resource for discussing options that are best for each buyer.