How Much of a Home Loan Can I Get With a 650 Credit Score?

A credit score of 650 is considered fair and should qualify you for most home loans, including conventional loans based on your income.

If you've got a 650 credit score, it's natural to wonder whether now is a good time to get a mortgage or whether increasing your credit score first is better. The good news? You can qualify for several types of mortgages with a 650 credit score. The bad news? You might pay a higher interest rate than someone with a good or very good score. Read on to answer, "How much of a home loan can I get with a 650 credit score?" for your situation. 

650 Credit Score: Is It Good or Bad?

The most common credit score model, the FICO score, ranges from 300 to 850. A credit score of 800 to 850 is exceptional, while a score of 579 or less is considered poor. In between, a credit score of 670 to 739 is classified as good, while scores that range from 580 and 669 are considered fair. Sixty-seven percent of Americans have credit scores of good or higher, and that could be you, too. 

A credit score of 650 is in the upper end of the fair range. With work paying off debt, becoming an authorized user or with a rent reporting company, you might be able to increase your credit score into the good range. 

How Does Your Credit Score Affect the Amount of Home Loan You Can Get?

When lenders approve your loan application, they look at factors like total debt, debt-to-income ratio, your credit score and credit history. Each of these can affect the maximum loan approval amount and loan terms. With a higher credit score, you could qualify for a larger loan, lower interest rate or more favorable repayment terms.

How Much Financing Can You Get for a Mortgage With a Credit Score of 650?

While some lenders deny a mortgage application if you have a 650 credit score, you can qualify for a conventional mortgage or a loan backed by the Federal Housing Administration (FHA), Veterans Affairs (VA) or U.S. Department of Agriculture (USDA) loan with that score.  

Conventional Loan

You can qualify for a conventional loan with a credit score of 620 or higher, so a 650 credit score will be enough if you meet the lender's other criteria. How much financing you can get will depend on your income, debt, debt-to-income ratio and other factors like the down payment amount. With a higher income, lower debt-to-income ratio, and downpayment of 20% or more, you could qualify for a larger conventional loan. 

If you apply for a conventional conforming loan, the maximum loan amount in most of the U.S. is $766,550, with higher limits in certain high-cost areas. 

FHA Loan

Government-backed FHA loans require a minimum credit score of 500 to 580. You'll need a credit score of at least 580 to secure the loan with just a 3.5% down payment. The total approved loan amount varies by individual circumstances. The Department of Housing and Urban Development's limits for single-family home loan amounts in 2024 range from $498,257 to $1,15 million.

USDA Loan

USDA loans are another government-backed mortgage option. The lender will have to do a full credit review if your credit score is below 640, so with a credit score of 650, you should be able to qualify if you meet other requirements. To qualify for the USDA loan program, you must meet maximum income requirements and purchase a home in a qualifying rural area. USDA maximum mortgage limits vary by area but are $377,600 in most of the country.

VA Loan

VA loans, offered by the Department of Veterans Affairs, are available to active and veteran military personnel and their spouses. According to the VA, there is no minimum credit score requirement, but many VA lenders require a credit score of at least 620. A 650 credit score should be enough to qualify for a VA mortgage loan if you meet the other VA loan requirements, including service requirements. 

What Additional Factors Impact Your Mortgage Rates?

Interest rates typically change, but they have recently become more unstable in the current market. While you cannot directly control the market rate, there are factors within your control that will impact the type of home loan you may qualify for.

1. Current Debt Levels - A high credit score and income does not guarantee approval for a loan; lenders also consider the debt-to-income ratio. This ratio shows a borrower's ability to manage debt, and a lower ratio is more favorable. Borrowers should be aware of their DTI and work on reducing debt or increasing income to improve their chances of loan approval.

2. Down Payment - Down payments can help reduce a lender's risk by providing a sense of security in case the borrower defaults on the loan. When a borrower puts down a substantial amount of money upfront, they have more invested in the property or asset, making them less likely to walk away from their financial commitment. This decreases the likelihood of the lender losing money in the event of a default. The down payment also acts as a demonstration of the borrower's financial stability and ability to save, which can further reassure the lender about the borrower's ability to repay the loan. Ultimately, down payments serve as a protective measure for lenders against potential losses.

3. Level of Income  - When it comes to applying for a home loan, your income plays a crucial role in determining the amount of money that lenders are willing to lend to you. Lenders typically adhere to a rule that states your monthly housing expenses should not exceed 28% of your gross monthly income. This means that the higher your income, the higher the loan amount you may qualify for.

Where to Get a Mortgage Now

How to Improve Your Credit Score Before Applying for a Mortgage

If you decide to improve your credit score before applying for a mortgage, here are the steps to take. 

Pay Outstanding Debt and Bills on Time

Paying off debt is one of the first steps to building your credit score. The amount owed makes up 30% of your credit score, so working to pay off debt will make a significant difference in your score. 

Even if you can't pay off all debt immediately, making all payments on time will go a long way to boosting your credit score. On-time payments make up 35% of your credit score. You can set up automatic payments for credit card bills and loan repayments to avoid accidentally missing a payment due date.

Don't Apply for New Credit

While a single new credit card shouldn't harm your credit score significantly, applying for multiple credit cards or loans within a short period can cause a significant dip in your credit score. Avoid applying for more than two to three new credit cards annually, and spread out those applications to avoid a dip in your credit score. 

New credit makes up 10% of your credit score, and too many new accounts can signal to lenders that you're struggling financially or taking on too much debt. 

Use a Mix of Different Types of Credit

Types of debt, including revolving credit like credit cards and installment credit like car loans or student loans, can also improve your credit score. Credit mix makes up 10% of your credit score. If you only have one type of debt, don't take on new debt to improve your credit score. The other options on this list will get you further than taking on more debt. 

Check Your Credit Report for Errors

You are entitled to a free copy of your credit report from each of the three main credit bureaus at annualcreditreport.com. Many major banks and credit card issuers also offer credit score and credit history tracking so you can easily check your report for errors. If you find errors in your credit report, you should dispute them with each credit bureau. 

Keep Old Credit Accounts Open

Even if you're not using them, old credit accounts can help contribute to a higher credit score. Your oldest credit line makes up 15% of your credit score. Unless the card has a high annual fee, keeping credit card accounts open will also increase your total available credit line and reduce your debt-to-credit ratio.

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