Buying a home is a big step, and it can be complex. For most, the biggest hurdles when buying a home are income and credit score. What income and credit score do you actually need for a mortgage? It may be more attainable than you think. Let’s take a closer look at what you really need to get a mortgage, and what type of mortgage you can get.

You already know that the income that you need for your mortgage depends on the price of the house you want to buy, and the down payment that you have. You might not know that the type of mortgage you get also plays a role. This article focus on the two most common types of loans; government-backed and conventional.

Government Backed Loans: FHA, VA, USDA
A government-backed loan is not actually provided by the government, but it is secured by a government agency, like the Federal Housing Administration (FHA), United States Department of Agriculture (USDA) or Veteran’s Affairs (VA). Each of these has slightly different requirements, but the most common is an FHA loan. We’ll use FHA loan requirements in this blog post. Keep in mind that the FHA secures the loan, but does not offer it; you’ll work with a bank or another lender.

Conventional Loans
A conventional loan follows guidelines set by Fannie Mae and Freddie Mac, which are publicly traded companies that are regulated by the government. Conventional loans are also offered by private lenders, but the requirements are different. There are different types of conventional loans, such as adjustable rate mortgages (ARMs) and jumbo mortgages, but we will deal with the most common type, a fixed-rate mortgage.

What Credit Score Do I Need for a Mortgage
Both government loans and conventional loans have income requirements. Income requirements can increase or decrease depending  your credit score and your down payment amount.

Your credit score will determine if you qualify for a loan and what your loan terms will be. Keep in mind that the details of your credit score, such as late payments, as well as your employment history and bankruptcy record will also play a role. Your credit score will also play a role in determining your interest rate. You can improve your credit score by consolidating and paying off debt, and making payments on time.

FHA Loan Credit Score Requirements
Borrowers can have a credit score as low as 500, but to qualify at that level, you’ll need at least 10% down. To qualify for the 3.5% minimum down payment, you’ll need a credit score of at least 580.

Conventional Loan Credit Score Requirements
To qualify for a conventional loan, you’ll need a credit score of at least 620, though many lenders require at least 640. If you want to work with a higher debt-to-income ratio of 50%, you’ll need a credit score of 700.

If your credit score or income aren’t yet up to loan term limits, make a plan for improvement. Talk to a financial advisor about consolidating your debt and improving your credit. Take a look at your monthly budget and see if you can make any cuts so you can save up for a down payment. With patience and careful planning, you can start looking for a home sooner than you think.