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 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.
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FHA Loan Articles and Mortgage News
October 28, 2018 - The One-Time Close construction loan, an option for FHA loan applicants, VA loan applicants, and USDA borrowers, offers the ability to have a home built from the ground up. Is this the right choice for you? Some borrowers have a sense of urgency about getting moved into a new home.
October 27, 2018 - What’s the difference between an FHA cash-out refinance loan and an FHA reverse mortgage? There are several distinctions between these two FHA guaranteed loans, both of which can result in cash back to the borrower as part of the loan transaction.
October 25, 2018 - The kind of FHA refinance loan you get will depend on what your financial needs and goals are; some borrowers want cash back, others need a lower mortgage payment, and some just want to get out of an adjustable rate mortgage into the predictability of a fixed-rate FHA mortgage.
October 23, 2018 - When you apply for an FHA home loan, the appraisal process is an important step. The appraisal is required to help the lender establish the fair market value of the home and make sure it meets FHA minimum standards.
October 22, 2018 - Maximum financing with an FHA mortgage is 3.5% of the adjusted value of the home. The loan amount for the purpose of calculating the maximum loan for purchase is not to include financing of the FHA Up-Front Mortgage Insurance Premium.
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!
