Good Credit History Makes it Easier to Qualify
FHA loans provide great assistance to many first-time homebuyers by offering mortgage loans with lower down payments. While this is a benefit for many people, recent changes in policy may have put the loans just out of reach for some would-be homeowners with questionable credit history.
Credit History and Score Requirements
For those interested in applying for an FHA loan, applicants are now required to have a minimum FICO score of 580 to qualify for the low down payment advantage, which is currently at around 3.5 percent.
If your credit score is below 580, however, you aren't necessarily excluded from FHA loan eligibility. Applicants with lower credit scores will have to put down a 10 percent down payment if they want to qualify for a loan.
So if you're planning to buy a house, and your credit score doesn't meet the minimum, you should weigh the advantages and disadvantages of putting down a larger down payment or using those funds to try and improve your credit score first.
Benefits of an FHA Loan
The reason why FHA loans are so popular is because borrowers that use them are able to take advantage of benefits and protections unavailable with most traditional mortgage loans. Loans through the FHA are insured by the agency, so lenders are more lenient. Here are a few benefits you can enjoy with an FHA loan:
- Easier to Qualify
While most loans exclude applicants with questionable credit history and low credit scores, the FHA makes loans available with lower requirements so its easier for you to qualify. - Competitive Interest Rates
You've heard the horror stories of subprime borrowers who couldn't keep up with their mortgage interest rates. Well, FHA loans usually offer lower interest rates to help homeowners afford housing payments. - Lower Fees
In addition to lower interest rates, you can also enjoy lower costs on other fees like closing costs, mortgage insurance and others. - Bankruptcy / Foreclosure
Just because you've filed for bankruptcy or suffered a foreclosure in the past few years doesn't mean you're excluded from qualifying for an FHA loan. As long as you meet other requirements that satisfy the FHA, such as re-establishment of good credit, solid payment history, etc., you can still qualify. - No Credit
The FHA usually requires two lines of credit for qualifying applicants. If you don't have a sufficient credit history, you can try to qualify through a substitute form.
For many homebuyers, using an FHA loan can really make the difference between owning your dream house comfortably or turning it into a financial nightmare. The FHA provides a wealth of benefits for applicants that qualify, so make sure you're making full use of them.
Browse Questions About Mortgage Topics
Down Payment RequirementsFHA Loan RequirementsFHA GuidelinesMortgage Loan TermsLoan Approval ProcessCredit RequirementsGetting Pre-QualifiedPrincipal and InterestDebt-to-Income RatioFinding a LenderUnderstanding Credit Scores
Credit Scores for FHA Loans
Credit Requirements for an FHA Loan
Higher Credit Helps You Obtain Your Loan
Tips for Improving Credit
Identify and Fix Credit Report Errors
SEE YOUR CREDIT SCORES FromAll3Bureaus
Do you know what's on your credit report?
Learn what your score means.
FHA Loan Articles and Mortgage News
After Your FHA Home Loan Closes
May 30, 2024 - What do borrowers need to know about life after mortgage closing? There are a few standard things borrowers are typically better informed about toward the end of the home loan process than at the beginning.What to expect after closing day is one of those topics.
FHA Renovation Loan Tips
May 29, 2024 - The first thing to know about FHA renovation loans, also known as FHA 203(k) rehab loans, is that they are available to any financially qualified borrower, whether they are first-time home buyers or experienced homeowners.
Learn About Some Important FHA Loan Features
May 27, 2024 - What special features do FHA mortgages offer first-time homebuyers and repeat borrowers alike? There are several options to be aware of when you are in the planning and saving stages of the home loan. For example,the lender is forbidden from charging you an early payoff fee.
Mortgage Loans and Credit Report Fees
May 25, 2024 - Credit report fees have increased substantially over the last few years. Consumer Financial Protection Bureau Director Rohit Chopra notes, the credit reporting industry is dominated by three players including Equifax, Experian, and TransUnion.
Saving Early for Your FHA Loan Down Payment
May 24, 2024 - Saving early softens the financial blow in the best of times, but when the housing market looks like a recovery could still be half a year away, it pays to give yourself every advantagebefore making an offer on a home and applying for the FHA mortgage to buy it.
