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The FHA usually requires two lines of credit for qualifying applicants. An FHA loan might make the difference between owning your dream house comfortably and turning it into a financial nightmare.

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September 23, 2017
FHA Rates for September 23, 2017
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The Path to Homeownership
FHA.com is a private company, is not a government agency, and does not make loans.

Credit Requirements for FHA Loans

Good Credit History Makes it Easier to Qualify

FHA loans provide great assistance to many first time home buyers by offering mortgage loans with lower down payments. While this is a benefit for many people, recent changes in policy may have put the loans just out of reach for some would-be homeowners with questionable credit history.

Credit History and Score Requirements

FICO Scores

For those interested in applying for an FHA loan, applicants are now required to have a minimum FICO score of 580 to qualify for the low down payment advantage, which is currently at around 3.5 percent.

If your credit score is below 580, however, you aren't necessarily excluded from FHA loan eligibility. Applicants with lower credit scores will have to put down a 10 percent down payment if they want to qualify for a loan.

So if you're planning to buy a house, and your credit score doesn't meet the minimum, you should weigh the advantages and disadvantages of putting down a larger down payment or using those funds to try and improve your credit score first.

Benefits of an FHA Loan

The reason why FHA loans are so popular is because borrowers that use them are able to take advantage of benefits and protections unavailable with most traditional mortgage loans. Loans through the FHA are insured by the agency, so lenders are more lenient. Here are a few benefits you can enjoy with an FHA loan:

  • Easier to Qualify
    While most loans exclude applicants with questionable credit history and low credit scores, the FHA makes loans available with lower requirements so its easier for you to qualify.
  • Competitive Interest Rates
    You've heard the horror stories of subprime borrowers who couldn't keep up with their mortgage interest rates. Well, FHA loans usually offer lower interest rates to help homeowners afford housing payments.
  • Lower Fees
    In addition to lower interest rates, you can also enjoy lower costs on other fees like closing costs, mortgage insurance and others.
  • Bankruptcy / Foreclosure
    Just because you've filed for bankruptcy or suffered a foreclosure in the past few years doesn't mean you're excluded from qualifying for an FHA loan. As long as you meet other requirements that satisfy the FHA, such as re-establishment of good credit, solid payment history, etc., you can still qualify.
  • No Credit
    The FHA usually requires two lines of credit for qualifying applicants. If you don't have a sufficient credit history, you can try to qualify through a substitute form.

For many home buyers, using an FHA loan can really make the difference between owning your dream house comfortably or turning it into a financial nightmare. The FHA provides a wealth of benefits for applicants that qualify, so make sure you're making full use of them.

Helpful Advice About Credit Scores and Loans:

FHA Loan Articles and Mortgage News

Read About FHA Requirements, Updates, and Guidelines
What FICO Score Do I Need Buy A Home?

August 6, 2017 - First-time home buyer are likely to wonder about the kind of credit requirements needed for an FHA mortgage. According to Experian, there is no set minimum to buy a  house. However, that does not mean you won’t have any minimum FICO score expectations from a lender or the FHA.

Minimum Credit Scores for FHA Loans

July 1, 2017 - FHA regulations and underwriting requirements are subject to change from time to time. Some of the changes come as part of new laws that close legal loopholes, improve the fairness of the FHA mortgage loan process, or modernize the FHA loan program.

How FICO Scores Affect Your FHA Home Loan

May 12, 2017 - The FHA Handbook instructs lenders that a borrower is technically qualified for maximum financing  at the required minimum 3.5% down payment when the applicant has a FICO score at 580 or higher. 

FHA Loans and FICO Scores

April 7, 2017 - FICO score issues are a common source of stress to potential FHA borrowers. Everyone wants to know if their FICO scores are high enough to qualify for an FHA mortgage. Is it possible to qualify for an FHA loan or refinance loan with credit scores from 500 to 579? Or are higher scores required?

FHA Loan Rules for Down Payment Gift Funds

March 22, 2017 - Borrowers wishing to purchase a home with an FHA loan may need some help with the down payment. There are rules that permit a borrower to receive such outside help, but the source and purpose of these funds are carefully regulated under FHA mortgage loan rules.