Can I Buy a House With a 687 Credit Score?

A credit score is a numerical representation of an individual’s creditworthiness, influencing access to various financial products, including mortgages. Understanding how lenders evaluate these scores, along with other financial factors, is a crucial step in navigating the homebuying process.

Understanding Your 687 Credit Score

A 687 credit score generally falls within the “good” range, though some models may categorize it as “fair” or “average.” Credit scoring models, such as FICO, typically define a good credit score as being between 670 and 739. This range indicates a responsible credit history, but it is not considered excellent or exceptional. While a score of 687 may not qualify for the absolute lowest interest rates available to those with scores in the 740+ range, it is often sufficient for obtaining a mortgage.

A 687 score suggests a moderate level of risk, indicating you are likely to make payments on time, but perhaps have a shorter credit history or higher credit utilization. Many conventional and government-backed loan programs are accessible with a score in this range. Your credit report, detailing payment history, amounts owed, length of credit history, new credit, and credit mix, provides the underlying data for this score.

Other Financial Considerations for Lenders

Beyond the credit score, lenders assess several other financial metrics to determine mortgage eligibility and terms. The debt-to-income (DTI) ratio is a primary concern, comparing your total monthly debt payments to your gross monthly income. Most lenders prefer a DTI ratio of 43% or lower, though some programs may allow for higher ratios.

Employment history and income stability are also thoroughly reviewed. Lenders typically require a consistent work history, often two years or more in the same industry, to ensure a reliable income source. Pay stubs, W-2 forms, and tax returns are commonly requested to verify income.

The amount of your down payment significantly influences lender perception of risk. A larger down payment, often 20% or more of the home’s purchase price, can reduce the loan amount and lead to more favorable interest rates. Having cash reserves available after closing can also strengthen your application. These reserves demonstrate your ability to cover unexpected expenses or temporary income disruptions, typically covering several months of mortgage payments.

Mortgage Options Available

Several mortgage options are generally available for individuals with a 687 credit score, each with distinct requirements. Conventional loans, not insured by the federal government, often require a minimum credit score of 620, making a 687 score acceptable. These loans offer competitive interest rates, particularly with a higher down payment. Private mortgage insurance (PMI) is typically required for conventional loans if the down payment is less than 20% of the home’s value.

Federal Housing Administration (FHA) loans are government-insured mortgages designed to make homeownership more accessible, especially for first-time buyers or those with lower credit scores. While the FHA minimum credit score can be as low as 500 with a 10% down payment, a 687 score easily qualifies for the more common 3.5% down payment option. FHA loans require both an upfront mortgage insurance premium and annual mortgage insurance premiums, which can add to the overall cost.

VA Loans

Veterans Affairs (VA) loans offer significant benefits to eligible service members, veterans, and surviving spouses, including no down payment. While the VA does not set a minimum credit score, individual lenders typically look for a score of at least 620 to 640. A 687 credit score is well within the acceptable range for most lenders offering VA loans, which are attractive due to competitive interest rates and lack of mortgage insurance.

USDA Loans

U.S. Department of Agriculture (USDA) loans also provide low-interest mortgages with no down payment for eligible rural and suburban properties. USDA loans generally require a credit score of 640 or higher, placing a 687 score in a favorable position. These loans are for properties in designated rural areas and have income limitations for borrowers.

Preparing for Homeownership

Gathering essential financial documents is a crucial preparatory step before applying for a mortgage. Lenders require recent pay stubs (last 30 days) and W-2 forms (past two years) to verify employment and income. Bank statements (last two to three months) confirm cash reserves and down payment funds. Tax returns from the previous two years are often requested, particularly for self-employed individuals or those with complex income structures.

Obtaining mortgage pre-approval provides a clear understanding of how much you can afford before beginning your home search. Pre-approval involves a lender reviewing your financial information and issuing a conditional commitment for a loan amount. This process involves a hard credit inquiry but offers a significant advantage during negotiations with sellers, demonstrating your readiness and ability to secure financing. Most pre-approvals are valid for 60 to 90 days.

Saving diligently for a down payment and closing costs is another component of preparing for homeownership. While down payment requirements vary by loan type, a larger down payment can reduce your monthly mortgage payment and overall interest paid. Closing costs, which include various fees associated with the loan and property transfer, typically range from 2% to 5% of the loan amount.