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
September 25, 2023Mortgage rates are hitting prospective homeowners hard this year and are approaching 8%, a rate that didn't seem very likely last winter. With so many people priced out of the market by the combination of high rates and a dwindling supply of homes.
September 19, 2023The FHA Handbook serves as a crucial resource for mortgage lenders, appraisers, underwriters, and other professionals involved in the origination and servicing of FHA-insured home loans. It outlines the policies and requirements for FHA-insured mortgages.
September 13, 2023FHA rehab loans are a specialized type of mortgage loan offered by the Federal Housing Administration that allows borrowers to finance both the purchase or refinance of a home and the cost of needed repairs.
September 8, 2023Borrowers considering an FHA loan should be familiar with some basic loan terminology. These loans are popular among first-time homebuyers and those with lower credit scores because they often offer more flexible eligibility requirements and lower down payment options.
September 2, 2023You may have heard the terms co-borrower and cosigner in connection with your FHA loan process, but aren't sure about the distinction. Both a co-borrower and a cosigner can help a primary borrower qualify for a mortgage, but they have different roles and responsibilities.
