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FHA Loan Credit Requirements

FHA loans have made the dream of home-ownership within reach for many first-time homebuyers, even for those with less-than-perfect credit. Offering easy qualification standards and low credit score requirements, these low-cost loans make buying a home not only possible, but also affordable.

Still wondering if your credit score will qualify for an FHA loan? Let’s take a closer look

Minimum Credit Score Requirements for FHA Loan

Generally, the FHA minimum credit score is the lowest among all mortgage loan types.

  • With a credit score of 580 or higher, a buyer would qualify for the FHA’s lowest down payment amount -- 3.5% of the total cost of the home.
  • Consumers with scores as low as 500 can qualify for an FHA loan and still buy a home. Lending to lower-credit buyers can be seen as more of a risk, so lower credit scores will also come with higher down payment requirements - 10% of the total cost of the home.

It’s important to understand that lenders set their own credit score minimums for FHA loans. While the FHA might allow sub-600 credit scores, borrowers with those kinds of scores might have a tough time finding lenders willing to move forward. Talk with lenders about their credit score guidelines and what might be possible.

Can You Get an FHA Loan with No Credit?

Many consumers don’t have a credit score at all. They may have never opened a credit card or taken out a loan, or they may be too young to have done so yet.

  • Borrowers will typically need to have a qualifying credit score in order to obtain an FHA loan.

When dealing with buyers without a credit score, lenders might be able to turn to alternate tradelines for help. This history can include things like past rent payments, utility bills or even payments of a gym membership or school tuition. The goal is to have a clear picture of the buyer’s payment history and their likelihood to repay their mortgage loan, should they be approved for one.

Guidelines on credit scores and alternate tradelines can vary by lender.

Minimum Credit Requirements Comparison by Loan Type

Loan Type Minimum Credit Score
FHA 580 from the FHA (with 3.5% down)
FHA 500 from the FHA (with 10% down)
VA Loan 640
USDA Loan 640
Conventional Loan 640

FHA loan credit requirements are often significantly lower than other loan options. As you can see in the chart below, the minimum credit score for FHA loan borrowers can be as low as 500 -- more than 100 points lower than what’s common for other mortgage types.

A quick note: Exact minimum credit scores vary by lender.

Minimum Down Payment Percentage by Loan Type

Loan Type Down Payment Percentage
FHA 3.5% - 10%
VA Loan 0%
USDA Loan 0%
Conventional Loan 3% - 5%

Keep in mind though, these loans will also come with a higher down payment. In the event that down payment is less than 20 percent, you’ll also need to pay Private Mortgage Insurance (PMI) for a period of time.

Manual Underwriting and FHA Loans

FHA loans use what’s basically an automated scorecard to automatically give borrowers initial loan approval. It includes things like income, debt, credit score and more. But because every buyer is different, not all buyers can be approved (or even evaluated) by this method. In this case, the loan file is moved to manual underwriting, and an underwriter reviews the file by hand from the start.

This review includes an evaluation of the buyer’s credit history, payment history, income, employment, debts, student loans and other financial liabilities, including things like child support and alimony. Manual underwrites will often have more restrictive lending guidelines than loans that are approved automatically.

Loan files with automatic approval must still go through an underwriting process to verify key information.