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While the 580 FICO score minimum is a major factor in how an applicant will pay for a mortgage, your credit score is not the only thing the FHA takes into account.

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September 21, 2017
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FICO Scores Over 580 Help Borrowers Qualify For FHA Loans

Home buyers looking to take advantage of great FHA loan benefits should already know they need to establish the best possible credit rating. Applicants with a better credit rating increase their options for mortgage or refinance loans. In order to qualify for the low 3.5 percent FHA loan down payment, applicants will need a FICO score of at least 580. Those that don't meet that criteria will have to put a down payment of 10 percent on the mortgage they want.

FHA loans are designed to help home buyers, so these government-insured loans usually come with more lenient requirements than typical mortgages or refinancing terms from traditional lenders. While the benefits don't vary much between someone with good credit and excellent credit, there is a very noticeable margin for those with bad credit and average to good credit.

Why You Need a Better Credit Score

While the 580 FICO score threshold is a major factor in how an applicant will pay for a mortgage, your credit score isn't the only thing the FHA takes into account. Payment history, bankruptcies and foreclosures are also issues that the agency looks at. While these factors may hurt your credit score, they don't necessarily eliminate you from loan eligibility.

That doesn't mean, however, that you can neglect your credit. While the FHA is lenient enough to help those with bad credit ratings, they also require recent credit history to be in good standing.

Extenuating circumstances like job loss, injury or anything else that prevented you to pay in a timely manner can, and most likely will, be taken into account. However, if you have demonstrated you purposely neglected payments or your credit rating, your chances of qualifying for an FHA loan will be reduced.

Be Safe, Not Sorry With Your Credit

Obviously, it's better to have good credit than bad credit when applying for any loan. Don't take your credit history for granted, though, because you might find an error or inaccuracy that could hurt your chances of qualifying for an FHA loan. Instead of going through the headache of disputing your application with your agency and holding up the process, be proactive and make sure your credit score and ratings are where they should be before approaching the FHA.

Helpful Advice About Credit Scores and Loans:

FHA Loan Articles and Mortgage News

Read About FHA Requirements, Updates, and Guidelines
Can Collection Activity Hurt Your FHA Loan Chances?

March 15, 2017 - Credit issues worry some FHA loan applicants. Not knowing how the lender will interpret some kinds of negative credit information causes a lot of anxiety for new borrowers. However, having a collection account on your record may not be an automatic barrier to getting an FHA mortgage.

FHA Lowers Mortgage Insurance Premiums for 2017

February 10, 2017 - The Federal Housing Administration is lowering mortgage insurance premiums on FHA mortgage loans in 2017. When you purchase a home with an FHA mortgage, part of your mortgage payment includes a required annual mortgage insurance premium (MIP).

FHA Loan Debt to Income Ratio Rules for 2017

December 8, 2016 - Your FHA loan options in 2017 include new purchase loans, reverse mortgages, cash-out FHA refinance loans, and much more. Borrowers should take some time to review their last 12 months of credit and loan repayment history in preparation for the new loan.

Income and Debt Ratios for FHA Mortgages

October 31, 2016 - What does a borrower needs to know when preparing to apply for an FHA mortgage? There is a list of items to pay attention to that does include FICO scores; you may find that lenders are looking for FICO scores averaging between 620 and 640.

Can I Use 401K Income to Qualify for an FHA Mortgage?

September 26, 2016 - Many borrowers want to know if the income coming from 401K accounts can be used as part of the debt to income calculation. What does the FHA loan rule book say about using a 401K to qualify? Are there cases where 401K income can be used in eligibility calculations?