Credit Building Tips

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

Shaun Connell
August 11, 2023

If you've been shopping around online looking at houses, you're likely wondering what your budget should be based on the mortgage amount a lender will extend to you. For example, how much of a home loan can you get if you have a fair credit score of 650?

The truth is, your credit score alone isn't enough information to know the loan amount you'll be offered. Lenders will look at your income and employment, DTI ratio, LTV ratio, and more before determining how much money they are willing to lend you.

Solution icon While a 650 credit score might mean that some lenders deny your application outright, there are a number of loan types you can potentially qualify for with this credit score. In order to determine how much money you'll receive in the form of a home loan, you'll need to incorporate other information like your income, DTI, and more.

It's worth noting that the loan amount you're offered by a lender isn't necessarily the same as the amount of home you can afford. In this post, we'll take a look at everything you need to know about how your credit score relates to how much house you can buy.

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

Your credit score is only one of the factors that impact the loan amount you'll qualify for. For this reason, there's no way to determine precisely how much of a home loan you can receive based solely on the information that you have a 650 credit score.

home bought with 650 credit score

It's also worth noting that the question "How much of a home loan can I get?" is really the second question you should be asking when you're thinking about buying a house. The more important question is, "How much can I afford?" (A little later in the article, we'll talk about how to determine how to calculate how much home you can afford based on your income and expenses.)

Your credit score is an important factor when it comes to mortgage approval, but it doesn't directly determine the loan amount you'll be extended. Factors like income, employment, debt to income ratio, loan to value ratio, and more will also factor in to determining the amount of money a lender is willing to loan to you.

The reason for this is it isn't at all uncommon for lenders to loan a larger sum of money than you initially expected. Just because a lender is offering to loan you a specific amount of money, this doesn't mean you can afford it.

Lenders are incentivized to loan out money because they make money off of the deal. The number you receive from the lender is not in any way an estimate of how much money you can afford to borrow but rather a description of how much money they're willing to extend.

The Factors That Impact How Much You Can Borrow For a Mortgage

Having a 650 credit score is only one piece of the puzzle when it comes to how much money you can borrow for a home loan. The truth is, your credit score is more relevant when it comes to your loan pricing (aka the interest rates and fees you're offered.)  Let's take a look at the different factors that will influence the mortgage loan amount you are offered.

Income and Employment

Lenders will take a look at your income and expenses when determining how much they will offer for a mortgage. Beyond that, they'll also want to know that you are earning a certain income consistently to help reduce the risk that you will default on the loan.

Debt-to-Income Ratio

Lenders don't just want to know how much money you're making-- they also need to know what percentage of your income is already going toward debt repayment.

Your debt-to-income ratio (DTI) is a metric that compares your gross monthly income to your monthly debt obligations (such as auto loans, credit card bills, and other debts.) The lower your DTI is, the more financially stable you appear to lenders.

They will usually want your total debts to be 36% or less than the amount of money you take in every month.

Are you wondering whether it's ok to apply for a new credit card when you're planning on buying a house in the near future? Check out our post about whether or not it's ok to open a new card account when you're applying for a mortgage soon.

Loan-to-Value Ratio

Another important factor is the way that the appraised value of the property relates to the loan amount. The metric used to determine this is known as the loan-to-value ratio (LTV). The lower your LTV is, the lower risk the lender is taking on.

In most cases, lenders will have a standard for the maximum LTV ratio they are willing to deal with.

Credit Score

Your credit score is an important factor when it comes to getting a home loan. In general, a higher credit score indicates that you are a responsible borrower. This could lead to better loan terms and potentially a higher loan amount.

Minimum Credit Scores For Different Types of Home Loans

The type of home loan you're applying for is going to have an impact on the minimum credit score you'll need to qualify for approval. At the same time, there isn't any specific, single credit score that will lead to an automatic mortgage qualification.

suburban home bought with loan with 650 credit score

Let's take a look at the minimum credit scores for each of the most common types of mortgages.

Conventional Loans

Conventional loans are offered by commercial banks as well as savings and loan associations. As opposed to FHA, USDA, and VA loans, conventional loans aren't backed or offered by a United States government agency.

Some lenders that offer commercial loans will accept credit scores as low as 620. Each lender will have their own requirements, though, and some might require borrowers will lower credit scores to meet additional criteria for approval.

In general, you'll be more likely to qualify for a conventional mortgage the higher your credit score is. Some lenders that offer conventional loans will accept applications with credit scores as low as 620. However, they often also have additional requirements that borrowers need to meet when their credit score is this low, such as a larger down payment or a higher income.

FHA Loans

FHA loans are guaranteed by the Federal Housing Administration. Geared towards individuals that can only put down small down payments and have lower credit scores, FHA loans are a popular choice for first-time home buyers.

It is possible to qualify for an FHA loan with a credit score as low as 500 to 579 if you can put 10% down.

Borrowers can potentially qualify with a credit score as low as 500 to 579 if they are willing and able to make a 10% down payment. If your credit score is 580 or higher, you might be able to qualify for an FHA loan with only a 3.5% downpayment.

USDA Loans

Another government-backed loan, these loans are backed by the U.S. Department of Agriculture. Designed for borrowers with low- to moderate-income in rural parts of the U.S., you usually need at least a 640 credit score to be approved.

You will typically need at least a 640 credit score to be approved for a USDA loan, but lenders could potentially be willing to extend a home loan to a borrower with a lower credit score if they meet additional criteria.

It's possible that you could get a USDA loan with a score lower than 640, depending on what the lender finds when they take a closer look at your credit profile.

VA Loans

Veterans and active military personnel along with their families can apply for these loans which are backed by the U.S. Department of Veterans Affairs.

The U.S. Department of Veterans Affairs does not set a minimum credit score required to receive a VA loan. However, individual lenders can have their own requirements. Typically, at least a 620 credit score is necessary.

There's no minimum credit score needed in order to qualify for a VA loan set by the government. That being said, these are government-backed loans that are actually financed by lenders that will likely have a minimum credit score. The minimum required score for VA loans is often around 620.

To learn more about the requirements for a loan from the Department of Veterans Affairs, check out our post about the minimum VA loan requirements in 2023.

Jumbo Loans

Jumbo loans are loans that exceed the lending limits for conforming loans as dictated by Fannie Mae and Freddie Mac. In most counties in the country, according to the Consumer Financial Protection Bureau, the loan must be $726,200 or less in order to qualify for a conforming loan. In high-cost-of-living areas, however, the loan amount can be as high as $1,089,300 to be able to get a conforming loan.

To be approved for a jumbo loan, you usually need a credit score of at least 700 or higher. Since lenders are taking on more risk by lending out such a large sum of money, they are incentivized to ensure borrowers have a strong credit profile.

When you're taking out a jumbo loan, it means you're buying a home that is more expensive than the typical abode. For this reason, lenders usually require a much higher credit score than for conventional or government-backed loans. The lender is taking on additional risk when they extend such a large loan to a borrower, so they want the borrower's credit score to indicate responsible credit habits.

Jumbo loans are the only loans on our list that you might not qualify for based on your credit score alone if you have a 650. In most cases, jumbo loan lenders require that borrowers have a credit score of 700 or higher.

Understanding How Your Credit Score Impacts Your Mortgage Rate

Your credit score will have a big impact on the rates you are offered by a lender. This is because rates are assigned based on the lender's assessment of how risky you are as a borrower.

The worse your credit score, the less appealing rates and terms you'll be offered. The better your credit score, the better rates and terms you'll be offered.

What Mortgage Rates Will I Be Offered With a 650 Credit Score?

You most likely won't be able to get the best available interest rates for a mortgage with a 650 credit score. 650 is considered a fair score-- it's not "poor," but it's not "good" either.

The national average FICO score in the U.S. is 710. A 650 is also considered a fair score in the VantageScore scoring model. However, most mortgage lenders use the FICO model, so this is the more relevant system in relation to mortgage rates and terms.

Some lenders might deny a mortgage application completely based on a credit score of 650. For many lenders, though, your credit score might not disqualify you out the gate. A 650 is sufficient for FHA, VA, and USDA government-backed mortgages.

The national average interest rate for a $250k mortgage on a 30-year fixed schedule for individuals with credit scores between 640 and 659 is, as of August 2023, 7.836%, according to FICO's Loan Savings Calculator. This means paying $400,128 in interest over the life of the loan.

By comparison, raising your 650 credit score by only 10 points to 660 could bump you up to receiving a 7.406% interest rate. Though this might seem like a small change, it means paying more than $25k less in interest over the life of the loan.

Home Loan and Credit Scores FAQ

Before I sign off, let's take a closer look at some of the most commonly asked questions about home loans and credit scores.

Why Do Lenders Care About Your Credit Score?

When your credit score is less than perfect, but you know that you are a responsible borrower, you can be left in a pretty frustrating scenario. The truth is, though, that lenders use credit scores as a way to understand how you have handled loans and personal finance in the past.

  • Lenders have an interest in understanding how you have fulfilled your credit obligations historically.
  • This gives them a better sense of whether or not you are likely to pay back any money you borrow.

Credit risk is a major concern for lenders, and understandably so. In most instances, a person that has a higher credit score isn't as risky of a borrower as someone that has a low credit score.

Is It Possible to Get a Mortgage With Bad or Fair Credit?

In general, the lower your credit score, the harder it will be to get a mortgage. That being said, most people with a 620 credit score or higher will at least be considered for a conventional loan. When it comes to government-backed loans, borrowers can potentially have a credit score in the low 500s and still be approved.

Of course, the worse your credit score is, the more risk the lender believes they are taking on. For this reason, you will pay more in interest and fees the lower your score is compared to those with perfect credit. The super low rates you see advertised by mortgage lenders are typically only applicable to people with the best credit scores-- 740 or higher.

There are a number of options available for people that have fair credit, including:

  • Conventional non-conforming loans
  • FHA loans
  • VA loans
  • USDA loans
  • Freddie Mac Home Possible loans
  • Fannie Mae HomeReady loans

If you're interested in buying a mobile home and your credit has seen better days, make sure you check out our post about buying a mobile home with bad credit.

How Can I Improve My Credit Before Applying For a Mortgage?

Improving your credit score before you apply for a mortgage can increase your chances of approval and help you receive better rates and terms.

If you're interested in boosting your score before getting a home loan, there are a few steps you'll want to take:

  1. Check your credit reports and scores. Request a copy of your credit report from each of the credit reporting bureaus. You can get a free copy from This can help you see what a lender will see on your report while also giving you the opportunity to watch out for any errors or mistakes. You'll want to dispute any errors you find ASAP.
  2. Make all of your bill payments on time. It's important to make sure all of your accounts are in good standing. Your credit score can reduce from just one late payment. If you missed a payment recently but the grace period hasn't ended yet, contact the creditor to see if you can pay it before it ends up on your credit report.
  3. Pay down your debt. While this might be easier said than done, working to reduce your credit card balances will help to improve your credit utilization ratio. A big part of your credit score, it's best to keep your credit utilization ratio below 30%.
  4. Resist the urge to open new accounts. While new credit accounts can improve your credit utilization ratio, it's generally best to avoid applying for new loans or lines of credit before and during the application and underwriting process. You also want to avoid closing old accounts, as this can increase your credit utilization ratio and lower your credit score.
  5. Consider asking for help. Becoming an authorized user on another person's account, assuming they are responsible borrowers, can help improve your credit score. This is particularly useful for first-time buyers and younger individuals that don't have an extensive credit history.

How Much House Can I Afford?

As mentioned earlier in the article, the amount of money that you're able to borrow isn't necessarily the same as how much you can afford to borrow.

It's best not to assume that the mortgage lending industry is operating with your best interest in mind. When a lender determines that you're a qualified borrower, they will often approve you for the largest amount of money they think you can afford. However, the amount of money they offer can, oftentimes, be a bit generous.

It's important to take your current and future needs into account when calculating how much house you can afford. One rule of thumb people use is the 28% rule. This can help you determine the home loan amount you can responsibly take on. The idea here is that you shouldn't be paying more than 28% of your pre-tax monthly income toward your mortgage payments.

Here are some considerations to keep in mind and tactics you can use when trying to decide how much house you can afford:

  • Try out some affordability scenarios. There are a number of different home affordability calculators online you can use. Play around with one of these calculators, inputting different potential scenarios. This can help you anticipate how your finances could be impacted by different events and circumstances down the road.
  • Shop around for a lender. When you're looking for lenders, it's important to talk to more than just one. You'll likely find that someone offers you a better interest rate, which can have a big impact on the amount of money you can spend on the house itself.
  • Be honest about your expenses. It's easy to just think about the expenses that are built into your monthly mortgage payment, such as taxes and insurance. Don't forget about the additional costs of home ownership, such as furnishing your new home, maintaining the property, and more.

Building Credit Can Improve Your Financial Opportunities

A 650 credit score is considered a fair score in the FICO scoring model. This is better than poor but less than good. Some mortgage lenders might disqualify your loan application based on your credit score. However, there are several home loan options for people with a fair credit score.

You can't determine the home loan amount you'll be offered solely using your credit score. Other elements need to be taken into account, including your:

  • Income and employment
  • DTI ratio
  • LTV ratio

If you are approved for a loan, your credit score will significantly impact the rates and terms you are offered. A lower credit score can mean paying a lot more in total over the life of the loan. For this reason alone, it can be well worth the effort to start building and improving your credit before you apply for a mortgage.

Are you trying to increase your credit score in order to improve your chances of getting the best possible loan terms? Check out our Credit Building Tips blog for more resources to help you along the way.

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Written By:
Shaun Connell
Shaun Connell is a personal finance and credit expert with a passion for helping individuals eliminate debt and improve their credit. He's enjoyed writing investing and financial content for over 15 years, with expertise in real estate, debt, banking, credit, and wealth building. His work has been seen by millions on the web.

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