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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FHA.com is a privately owned website, 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 homebuyers 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 homebuyers, 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.

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FHA Loan Articles and Mortgage News

FHA Home Loan Down Payments: What to Know Before You Buy

March 13, 2024 - FHA home loan down payments are typically lower than many conventional mortgage equivalents, especially if you can’t afford the 20% down needed to avoid conventional private mortgage insurance, which is required on a conventional mortgage.

Home Loan Interest Rate Facts

March 1, 2024 - Home loan interest rates are back in the 7% range, with dips back to the 6% range along the way. What do you need to remember in a time when the housing market is trying to improve but is hitting some rocky territory along the way? We cover some of the major issues in this article.

FHA Loan Requirements Can Be Confusing

February 28, 2024 - If you are new to FHA loans, their requirements can be confusing at first, at least until you are more familiar with the loan program and its rules. A glance at the FHA loan approval basics typically needs a bit of explanation, as we’ll discover in this article.

Construction Loan or Rehab Loan?

February 27, 2024 - If you have never bought or built a home, your options may initially seem confusing. The more you learn about different loan types and the application of those home loans, the more you realize you have a wealth of options depending on your goals and needs for the home.

Home Loan Scam Tactics You Should Know About

February 25, 2024 - Major lenders are warning home loan applicants about scams. These warnings are issued frequently. What makes the current round of warnings different and more urgent is the level of sophistication these swindles have reached recently.