FHA Credit Requirements and FICO Scores
August 27, 2023
While the FHA has set the minimum credit score at 500, most lenders that offer FHA loans typically require a minimum FICO score of 580 or higher to qualify for the 3.5% down payment option. Borrowers with FICO scores below 580 may still be eligible for an FHA loan, but may need to come up with a 10% down payment to get the loan.
Lenders will also review your credit history as an indicator of your past financial responsibility. A history of late payments, collections, or delinquencies can have a negative affect on your ability to qualify for an FHA loan. Generally, they'll probably be looking at the last two years of your credit history.
They'll also pull your credit report from the three major credit bureaus (Equifax, Experian, and TransUnion) to evaluate your credit history. It's important to review your credit report for accuracy and dispute any errors before applying for an FHA loan.
FHA guidelines typically require borrowers to have a maximum debt-to-income ratio of 43%. This means that your total monthly debts, including your mortgage payment, should not exceed 43% of your gross monthly income.
Your mortgage provider may also consider your employment history, income stability, and overall financial stability when evaluating your creditworthiness. Try not to make big changes right before you apply for a home loan.
If you've had a bankruptcy or foreclosure in your financial history, there are waiting periods before you can qualify for an FHA loan. The waiting period varies based on the circumstances and the type of loan.
If you have a lower credit score or do not meet the FHA credit requirements on your own, you may be able to apply with a co-borrower who has a stronger credit profile.
Since FHA loan requirements can change over time and lenders may tighten their own requirements during tough economic times, it's crucial to consult with an FHA-approved lender or visit the official FHA website for the most current information.
------------------------------
RELATED VIDEOS:
Keep Your Eyes on Your Loan Balance
Learn About FHA Loan Prepayments
Taking Out a Home Loan Makes You a Borrower
FHA Loan Articles
February 17, 2025The federal government backs FHA home loans, which allows participating FHA lenders to offer lower down payment options and more lenient credit requirements. How much do you really know about your FHA home loan options and how they compare to other mortgage choices?
February 13, 2025For many college graduates, student loan debt is a concern. A common question is how this debt impacts the ability to buy a home. This Q&A explores the relationship between student loans and FHA loan approvals. How much do you know about how your student loan debt affects your ability to be approved for a mortgage?
February 12, 2025Choosing between FHA and conventional home loans can be daunting for some first-time home buyers. What are the concerns between these two programs, and what does each one offer the borrower? We examine some of the key issues in our question-and-answer session about FHA mortgages versus conventional loans.
February 11, 2025Established in 1934 as part of the National Housing Act, the FHA's primary mission is to stimulate the housing market by providing mortgage insurance to lenders. This insurance reduces the risk associated with lending to borrowers who may otherwise be considered higher risk, encouraging lenders to offer more favorable terms, such as lower down payments and more flexible credit requirements. A key element of the FHA program is its commitment to fair housing, which is deeply rooted in the Fair Housing Act.
February 10, 2025How much do you really know about the home buying process? One major factor in protecting your new investment is knowing how the title search process works and why you need to have one done. This quiz will assess your comprehension of what a title search entails, why it's so important when using an FHA loan, and how it protects you as a buyer. From identifying potential liens to guaranteeing clear ownership, a title search plays a critical role.
