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.
Credit Scores for FHA Loans
SEE YOUR CREDIT SCORES From All 3 Bureaus
Do you know what's on your credit report?
Learn what your score means.
FHA Loan Articles and Mortgage News
November 4, 2021 - Need to get a lower interest rate on your mortgage? Are you thinking of refinancing to stop dealing with the interest rate adjustments of an ARM loan? Or maybe you are considering a refinance loan to cash in on the equity in your home. FHA home loan options are available.
November 2, 2021 - With a home loan you should consider doing some calculations on the amount you pay on the loan principal and the interest, divided by the number of months you are obligated to on the mortgage note. Also consider a shortlist of other expenses that may be included.
October 31, 2021 - The FHA home loan program specifies a minimum credit score of 500 for basic loan approval, and a credit score of 580 or above for the lowest down payment. But these FHA credit score ranges do not always match the lender’s requirements. Many lenders start at 620 for home loan qualifications.
October 29, 2021 - Do you feel ready to start the FHA home loan application process? Some begin without being prepared enough or they apply too early in another way. And doing so they can make it hard for a participating lender to approve a mortgage loan guaranteed by the FHA.
October 27, 2021 - When you start thinking about refinancing your home loan, the priorities you have going into the application process are very important when it comes to deciding what kind of refi to choose. Do you need a lower interest rate on your FHA home loan? Is your priority a lower monthly payment?
