What Credit Score Do You Need for an FHA Loan?

FHA loans are a popular choice for first-time homebuyers and people with limited credit histories. But what credit score do you need to qualify for an FHA loan?

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Introduction

The Federal Housing Administration, or FHA, is a government agency that provides mortgage insurance on loans made by FHA-approved lenders. Mortgage insurance protects lenders from losses caused by defaults on home loans.

FHA loans are a popular choice for first-time homebuyers and people with low credit scores because they have relatively lenient credit requirements. However, you do need a minimum credit score of 580 to qualify for an FHA loan, and the maximum loan amount is limited to $526,425 in most parts of the country.

If you’re not sure what your credit score is or if you have any other questions about the FHA loan process, our team at Trulia can help. Give us a call today at (888) 482-0002.

What is an FHA Loan?

FHA loans are mortgages that are insured by the Federal Housing Administration (FHA). This type of loan is popular among first-time homebuyers because it has more flexible credit requirements and allows for a smaller down payment than a conventional mortgage.

To qualify for an FHA loan, you must have a credit score of at least 580. However, if you have a credit score between 500 and 579, you may still be eligible for an FHA loan, but you will need to put down 10% instead of the standard 3.5%.

If you have any questions about your eligibility or the application process, please contact our team of experts. We would be happy to help you get started on your journey to homeownership.

What is the Minimum Credit Score for an FHA Loan?

In order to qualify for an FHA loan, you must have at least a 500 credit score. However, there is a catch. If your credit score is between 500 and 579, you will still be eligible for the loan, but you will be required to put 10% down instead of the usual 3.5%.

For those with a credit score of 580 or higher, the minimum down payment for an FHA loan is 3.5%. This is still a relatively low down payment, especially when you compare it to the 20% required for a conventional mortgage.

If your credit score is below 580, you may still be eligible for an FHA loan if you can provide a 10% down payment. However, this isn’t always the best option since you will have to pay PMI (private mortgage insurance) on your loan.

How to Improve Your Credit Score

Credit scores are three-digit numbers that represent how likely you are to repay debt. A high score shows that you’re a low-risk borrower, which could qualify you for a lower interest rate on a loan. A low credit score could lead to a higher interest rate and could mean you won’t be approved for a loan at all.

If your credit score is on the low side, there are things you can do to improve it. Start by getting your credit report from all three major credit bureaus—Experian, TransUnion and Equifax—and fix any errors you find. You can also add positive information to your report by maintaining a good payment history and keeping your balances low.

You can also work on building your credit by using a credit card responsibly. This means making payments on time, every time and keeping your balance below 30% of your credit limit. If you can do this, you’ll start to see your score improve over time.

Conclusion

In order to qualify for an FHA loan, you must have at least a 500 credit score. However, there is a catch: you will be required to pay 10% of the home’s purchase price as a down payment. If you can swing this down payment, then an FHA loan may be right for you.