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
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 QualifyWhile 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 RatesYou'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 FeesIn addition to lower interest rates, you can also enjoy lower costs on other fees like closing costs, mortgage insurance and others.
- Bankruptcy / ForeclosureJust 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 CreditThe 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.
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FHA Loan Articles and Mortgage News
April 12, 2018 - There’s more than one factor at work in that particular equation, as we’ll see. Did you know you can buy or renovated a multi-unit property with an FHA mortgage? Or rent out the unused living spaces in your newly purchased property?
April 7, 2018 - The FHA loan program has several options to refinance a home loan. Borrowers need to choose mortgage refi options not only based on their financial needs and goals, but also their plans for the property they have purchased long-term.
April 5, 2018 - FHA loan rules in HUD 4000.1 address situations where a loan applicant may have a short employment history, frequent changes in employers, and gaps in employment. They also instruct the lender how to proceed when a borrower has a temporary reduction in income.
April 1, 2018 - If you are new to the home loan process, you may encounter industry jargon that sounds confusing. First time home buyers might not realize that most mortgages, FHA loans or not, require down payments plus cash needed to close.
March 30, 2018 - When you find a house you want to commit to purchasing with an FHA home loan, the appraisal process is what determines the market value of the property compared to the asking price. The FHA appraisal is also a basic review of the home to make sure it meets minimum standards.
FHA.com Reviews
FHA.com is a one-stop resource for homebuyers who want to make the best decisions when it comes to their mortgage. With our detailed, mobile-friendly site, individuals can access information about different FHA products, the latest loan limits, and numerous other resources to make their homebuying experience easier. Take a look at some of the reviews from other FHA.com visitors!
