If you’re looking to get a FHA loan, you’re probably wondering what the minimum credit score is. Here’s what you need to know.
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The Basics of FHA Loans
FHA loans are mortgages that are insured by the Federal Housing Administration. These loans are designed for borrowers who may not have the best credit score or the most money for a down payment. The minimum credit score for a FHA loan is 580.
What is an FHA loan?
An FHA loan is a mortgage that’s insured by the Federal Housing Administration (FHA). They are popular especially among first time home buyers because they allow down payments of 3.5% for credit scores of 580+. However, borrowers must pay mortgage insurance premiums, which protects the lender if a borrower defaults.
FHA loans are available in all 50 states and territories like Puerto Rico, Guam, and U.S. Virgin Islands.
Who is eligible for an FHA loan?
In order to be eligible for an FHA loan, borrowers must have at least two established lines of credit, a debt-to-income ratio (DTI) of 31% or less excluding the expected mortgage payment, and no delinquent federal debts. In addition, borrowers must have a minimum credit score of 580 to qualify for the 3.5% down payment option and a minimum credit score of 500 to qualify for the 10% down payment option.
The Minimum Credit Score for a FHA Loan
The Federal Housing Administration (FHA) offers several mortgage insurance programs, each with its own minimum credit score requirements. However, the minimum credit score for an FHA loan is 580. This is the minimum score required by the FHA to qualify for their 3.5% down payment program.
What is the minimum credit score for a FHA loan?
In order to qualify for an FHA loan, you must have at least a 500 credit score – however, a credit score of 580 is the ideal number to get you a lower interest rate. If your score is below 580, you’ll still qualify for an FHA loan, but you’ll be required to put 10% down.
How to improve your credit score
There are a few things you can do to improve your credit score:
-Pay your bills on time. This is one of the most important factor in your credit score.
-Maintain a good credit utilization ratio. This means using no more than 30% of your available credit at any given time.
-Keep old accounts open. The length of your credit history is another important factor in your credit score.
-Avoid hard inquiries. Inquiries show up on your report when you apply for new credit and can ding your score, so only apply for newcredit when you really need it.
If you’re looking to buy a home, a good credit score will go a long way in helping you qualify for a loan with favorable terms and rates. If you’re not sure where yours stands, you can check it for free on NerdWallet.
The Bottom Line
Unless you’re a veteran, you’ll need a FICO credit score of at least 580 to qualify for a Federal Housing Administration loan. With a score that low, you’ll probably have to pay a 10% down payment. If you have a credit score of 500 or below, you won’t qualify for an FHA loan.
Minimum credit score for a FHA loan
The Federal Housing Administration (FHA), a division of the U.S. Department of Housing and Urban Development, has been insuring home loans since 1934. FHA loans are very popular among first-time home buyers because they require only a 3.5% down payment and 640 is usually the minimum credit score needed to qualify for an FHA loan. Borrowers with credit scores of 580 and below may qualify for an FHA loan but they need to put down at least 10% for a down payment. A credit score of 620 is typically the minimum credit score needed for conventional loans, which are not backed by a Government agency like the FHA, the VA or the USDA.