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Borrower qualification for a 3.5% down payment mortgage requires a minimum FICO® score of 580. However, approved lenders may have stricter requirements.

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FHA Credit Requirements

FHA Credit Requirements

One of the main things many first-time homebuyers worry about then shopping for a mortgage, is whether their credit score is high enough. It's a source of stress for Americans looking to get a loan. Your credit score impacts the type of mortgage you'll qualify for, what interest rate you get. When it comes to the FHA, it also determines how big of a down payment you'll have to make.

Credit Scores Needed for FHA Loan Qualification

The FHA has famously low credit score requirements; that's what makes them so appealing. You need a credit score of at least 500 to be considered eligible for an FHA loan, but this doesn't qualify for the FHA's most affordable down payment options.

Your credit score is directly tied to your down payment requirement. Borrowers with a credit score of 580 and higher can qualify for the FHA's lowest down payment requirement of 3.5%, whereas those with scores between 500 and 579 must pay 10% of the loan amount.

In terms of actual dollars, with a 520-credit score, you'd need to pay $25,000 (10%) as a down payment on a $250,000 home. But with a credit score of 610, you would be paying $8,750 (3.5%).

Your credit score will also impact the interest rate on the mortgage. A higher interest rate shows lenders that you are less of a risk, which will likely get your a lower interest rate and make you eligible for adjustable-rate mortgages or loans with shorter terms.

Know Your Credit Score

It's important for potential homebuyers to do their homework. So if you're getting ready to buy a home, make sure you check your credit score. You might have a high enough score to where you don’t have to worry about being approved. If not, there are ways you can work at improving it:

  • Pull your credit report and review it. Check to see if there are any errors and if so, dispute them.
  • Make sure you are paying your bills on time, every time. Set up automatic online payments where you can so you never miss a due date. Missed or late payments can stay on your record for years.
  • If you don’t have an established credit history, start building one. Set up utility bill payments online through a credit card account in your name to help establish credit.
About the One-Time Close Constuction Loan
To qualify for an FHA loan with a 3.5% down payment, the FHA requires a credit score of at least 580. A 500 FICO® score will qualify you with a 10% down payment.
See Your Credit Scores From All 3 Bureaus
See Your Credit Scores From All 3 Bureaus

FHA Loan Articles

FHA One-Time Close Construction Loans: Issues to Consider

It’s a great option to consider if you want to build your dream home on your own land instead of buying someone else’s already-lived-in house. FHA One-Time Close mortgages are also referred to as single-close construction loans--you’ll see these terms used interchangeably.

Down Payments for FHA Loans

One of the major hurdles that keeps families from purchasing a home is the need for a down payment.  The FHA’s goal is to offer more homebuying opportunities to low- and moderate-income Americans and set more easily achievable down payment requirements for borrowers. 

When Should I Get Approved for a Home Loan?

One of the first steps to take when you decide to buy a home is getting pre-approved for a mortgage. It is important to know what it means to get pre-approved for a home loan, and what the pre-approval letter does and doesn’t do for your home buying chances.

What Affects a Home Loan Applicant's Credit the Most?

A home loan is one of the most important investments you can make. Buying a home means owning property, and being a homeowner means there's potential to watch your investment grow in value over time.  But first, the lender has to make sure the borrower is a good credit risk.

Reasons for FHA Refinancing

Interest rates started to decline in 2019 and still seem considerably low. The average rate for a 30-year, fixed rate home loan has fallen from 4.94% in November 2018 to 3.13% in October 2021. A point drop in your interest rate could translate to huge savings with each monthly payment

FHA Loan Requirements for 2021 and Beyond

The FHA’s aim is to make homeownership more affordable and accessible for Americans, and it has been doing so for decades. It insures home loans made by FHA-approved lenders so borrowers can purchase single-family and multi-family homes in the US and its territories. 

-- Find More Articles in the FHALoan Library --

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