Minimum credit score for an FHA loan

Quick insights

• A credit score of 580 or higher allows you to qualify for an FHA loan with just a 3.5% down payment.fha-loan-experian
• Borrowers with scores between 500 and 579 may still qualify, but they must make a 10% down payment.
• Some lenders may require a higher credit score than FHA’s minimum, so borrowers may want to shop around and compare lenders.

As a first-time homebuyer, understanding the minimum credit score needed for an FHA loan can help determine whether this type of financing is an option. FHA loans are designed to provide more accessible financing options for individuals with lower credit scores compared to conventional loans.

While the FHA has specific guidelines regarding credit scores, meeting the minimum requirement doesn’t automatically guarantee approval. Knowing the requirements and factors loan providers consider can help you prepare for the application process.

What is an FHA loan?

An FHA loan is a type of mortgage that is insured by the Federal Housing Administration (FHA). It is designed to help lower-income and first-time homebuyers qualify for homeownership. FHA loans typically come with more lenient credit requirements and lower down payment options compared to conventional loans.

The minimum credit score needed for an FHA loan

To qualify for an FHA loan with a 3.5% down payment, the minimum credit score requirement is usually 580; if your score is between 500 and 579, you may still qualify for an FHA loan, but you’ll need to put down at least 10%.fha-loan-experian Keep in mind that minimum credit score isn’t the only FHA mortgage qualification. Lenders will consider other factors such as your income, debt obligations and overall financial situation.

FHA loan requirements

FHA loans can be a great option for many first-time homebuyers, but there are a few specific requirements. These include:

• Credit score: A minimum score of 580 is generally required to qualify with a 3.5% down payment.
• Down payment: Depending on your credit score, the required down payment is typically 3.5% or 10% of the home’s purchase price.fha-loan-experian
• Debt-to-income (DTI) ratio: Mortgage providers usually look for a DTI ratio of 43% or lower, though some may allow higher ratios with additional qualifications.fha-loan-experian
• Primary residence: The home must be used as your primary residence.
• Mortgage insurance premium (MIP): FHA loans require both an upfront mortgage insurance premium (UFMIP, typically 1.75% of the loan amount) and an annual mortgage insurance premium paid monthly.fha-loan-experian

What if your credit score doesn’t meet the FHA loan requirements?

If your credit score falls below an FHA loan requirement, you could continue on your journey toward homeownership. Credit score is not the only factor mortgage providers review—your down payment and debt-to-income (DTI) ratio are also considered. Lenders review potential borrowers differently but generally look at a range of financial factors.

In summary

If you’re planning to apply for an FHA loan, improving your credit score can help you qualify more easily and potentially get better interest rates. FHA loans offer flexible credit requirements, often starting at a 580 minimum score. Even if your score isn’t where you want it to be, you could still work toward homeownership. Making timely payments and lowering debt can steadily improve your credit score over time. If you’re looking for guidance and want to explore what’s possible for your situation, consider speaking with a Home Lending Advisor.