Understanding FHA Loan Credit Score Requirements
FHA loans can provide answers for some first-time home buyers who have lower credit scores and are struggling with conventional lenders. While FHA loans have a lower requirements standard than most other loans for house buying, there are still requirements and limits that must be met.
If you want to buy a home and are a first-time buyer, or are looking for a conventional loan you’ll want the best information possible. Let’s discuss the basics of FHA credit score requirements.
Credit Scores Must be 500 or More
To qualify for an FHA home mortgage loan, you must have a minimum credit score of 500. That being said, the higher your credit score is, the more benefits you will qualify for. For instance, with a minimum score of 500, you would not be eligible for the lower 3.5% down payments, but would still see a lower rate than with many conventional mortgage loans where eligibility may not even be an option.
Borrowers with scores that are below 500 should work to improve their fico score as lenders require loan applicants to have a higher score.
Higher Credit Scores Can Mean Lower Down Payments
Applying for an FHA loan with a credit score in the 500 to 579 range will require a minimum down payment of approximately 10%. However, if your credit score is above the 580 marks, you could see down payments as low as 3.5%. The higher your personal credit score is the better your chances are for a lower down payment. So if you can work to improve your credit score that is a great goal.
Requirements Vary by Lender
While these standards may seem simple and to the point, it is essential that you understand that there are variances in the equations. These are just the guidelines put in place as the minimum FHA requirements for qualification.
Other factos that need to be considered are those of the lenders themselves. Each lender will also come with its own set of rules and standards to be followed. It is smart choice to look at different lenders and make an educated choice as to which one fits your specific needs the best.
More: FHA Loan 101