Credit scores are on the rise. According to Experian, since 2016, the average credit score for all consumers has risen from 699 to 715. Over the same time period, the average credit score for those with a mortgage has risen from 739 to 758. That puts the average credit score for mortgage holders 40 points above the national average.
For hopeful homeowners, the rise in credit scores presents a unique opportunity to potentially buy in 2025. While there are other obstacles to purchasing property, such as high interest rates and low inventory, a better credit score removes a barrier that once prevented people from entering the housing market.
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For those who are one of the millions looking to buy a home next year, here are the average credit scores for five different types of mortgage loans, per Experian data.
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Experian reported that the average credit score for Americans with a conventional/conforming mortgage loan is 738.
Homeowners with these types of loans carry an average mortgage of around $220,000, with the average cost of the loan holding steady at $4,300.
Generally, to qualify for a conventional loan, purchasers will need to have a 10% down payment.
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Jumbo loans, or those that exceed the loan limits set by Fannie Mae, Freddie Mac and the Federal Housing Finance Agency, tend to have higher costs compared with conventional loans. They are also reserved for individuals with higher credit scores.
On average, jumbo loan borrowers have a credit score of 768 and take out a loan of around $1.1 million.
Even with cooling inflation, saving 10% (or more) for a down payment can be challenging for the average American. Programs and alternative loans are available to help potential homebuyers secure lending. Federal Housing Administration (FHA) loans are government-backed loans that help to protect lenders against losses.
The protection from the FHA enables lenders to offer fewer restrictions, including lower down payments and more options for individuals with credit scores below 700.
The average credit score for an FHA loan carrier is 645, and the average loan amount is $215,000.
Veterans may qualify for a number of benefits using a Veteran Affairs (VA) home loan. Most lenders remove down payment requirements, offer competitive interest rates and include limited closing costs.
