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 Cash-Out Refinancing Instead of a Renovation Refinance?

June 13, 2024 - With an FHA rehab loan, known as the FHA 203(k) rehab loan, you can buy or refinance a home needing improvement. This type of loan is possible, but the house must be brought into compliance with FHA minimum standards and local building code.

Employment and Income Rules for FHA Mortgages

June 11, 2024 - When some look at their loan approval potential, they think more about FICO scores than any other aspect of home loan approval. But income and employment count, too. We examine how influential those factors are below.

Home Loan Variables and Options to Consider

June 10, 2024 - At every stage in the home loan process, there are choices, starting with the basic decision to own your own home instead of renting someone else’s property. What other choices await you on your home loan journey?

FHA Loan Tips for Buying Older Homes

June 9, 2024 - Not every house available for sale is new construction or ever recent construction. Appraisal issues for houses that haven’t existed very long can be much different than for houses a few decades old or older.

FHA Rehab Loans vs. Home Improvement Loans

June 7, 2024 - What’s the difference between FHA rehab and home improvement loans? Some people use the terms interchangeably, but an FHA 203(k) rehab loan is very different from a home equity line of credit or a home improvement loan.