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
Beware of Home Renovation Scams
May 21, 2024 - Are you looking for a builder to work on your roof, basem*nt, or other areas? Do you need an electrician, plumber, or an energy-efficiency consultant?In all cases, never respond to third parties that offer you their services without you having contacted them first.
Avoid These Things When Planning an FHA Loan
May 19, 2024 - Many finance blogs and pundits write about what to do when planning and saving for a home loan. But what about the advice on what not to do before application time?A common mistake is sticking with your current lender without comparing your options elsewhere.
Questions to Ask the Seller Before You Buy a Home
May 17, 2024 - If you are new to house hunting, there are important questions to ask the seller of the property you want to buy. Sometimes, the answers are very important. Other times, the answers aren’t as important as the seller’s response to the question.
FHA Home Loan Options In Natural Disaster Areas
May 16, 2024 - There are many articles about FHA loan options for those who have had houses damaged or destroyed by a wildfire, flood, or other natural disaster.But what about FHA borrowers who have applied for FHA home loans, but have yet to close the deal with disaster strikes?
What to Know About Second Appraisals
May 15, 2024 - In 2024, the FHA and HUD modified important aspects of the FHA single-family home loan appraisal guidelines to incorporate reforms to reconsider appraisals due to defects, policy violations, and other issues.
FAQs
FHA loan requirements include a minimum credit score of 500 as well as limits on your total monthly debt load. Kate Wood joined NerdWallet in 2019 as a writer on the homes and mortgages team.
What credit score do you need for an FHA loan in 2024? ›
FHA Credit Requirements for 2024
FHA Loan applicants must have a minimum FICO® score of 580 to qualify for the low down payment advantage which is currently at 3.5%. If your credit score is below 580, the down payment requirement is 10%. You can see why it's important that your credit history is in good standing.
What is the DTI limit for FHA in 2024? ›
The FHA-recommended limit is a DTI ratio of 43%. However, even if you have a higher DTI ratio, lenders can still consider you if you have considerable cash reserves and a high income.
What is the flip rule for FHA in 2024? ›
The 90-Day Flip Rule
The lender requires the FHA appraisals to check whether the property falls under the FHA 90-day flip rule. If the 90-day rule applies to the property, the lender is likely to reject the loan. This rule protects borrowers and lenders from investing in worn-out properties.
What is the APR for FHA loans in 2024? ›
For most of early 2024, FHA mortgage rates have hovered around 7 percent.
What will disqualify you from an FHA loan? ›
The three primary factors that can disqualify you from getting an FHA loan are a high debt-to-income ratio, poor credit, or lack of funds to cover the required down payment, monthly mortgage payments or closing costs.
Can I get an FHA loan with a credit score of 524? ›
FHA Loans: 500 minimum credit score
FHA loans require a minimum 500 credit score, and applicants with credit scores of 580 or higher can make a 3.5 percent down payment. The FHA even makes provisions for buyers with no credit score whatsoever. Check your eligibility for an FHA Loan.
What is the FHA 3 month rule? ›
The FHA flip rule explained
It states that the seller must have owned the property for more than 90 days before a new purchase contract can be written for a buyer using an FHA loan. If this time has not passed, the parties must wait until the 91st day to write the contract.
What is the FHA 3 year rule? ›
This means the appraiser will determine who has owned the property for the last three years. If the timeframe from the new home sale contract and the ownership of the property is less than 90 days, FHA lenders will likely decline the mortgage approval.
What will mortgage rates be in mid 2024? ›
Mortgage rate predictions 2024
The MBA's forecast suggests that 30-year mortgage rates will fall into the 6.4% to 6.7% range throughout the rest of 2024, and Fannie Mae is forecasting the same. NAR believes rates will average 7.1% this quarter and fall to 6.5% by the end of 2024.
How Increased FHA Loan Limits Benefit First-time Homebuyers in 2024. a Great news for first-time homebuyers who want to purchase a home with a lower down payment and credit score requirements. Starting January 1, 2024, the new FHA floor loan limit will be $498,257 for a single-family home in most parts of the country.
Can you make too much money to qualify for an FHA loan? ›
FHA loans do NOT have the same type of income limitation that USDA loans have. Simply put, you can't make “too much” or have “too high” of an income. You have to make enough to qualify of course, but there is no such thing as making too much for an FHA Loan.
What are the basic requirements for an FHA loan? ›
FHA loan requirements and loan limits: Who qualifies?
- Credit score: 500 (10% down payment), 580 (3.5% down payment)
- Down payment: 3.5% (score 580 or higher), 10% (score of 500 to 579)
- Debt-to-income ratio: 43%
- Mortgage insurance: Yes.
- Income limits: No.
- Occupancy: Primary residence only.
- Loan limits: Yes.
Overall, forecasters predict mortgage rates to continue easing, but not as much as previously thought. While McBride had expected mortgage rates to fall to 5.75 percent by late 2024, the new economic reality means they're likely to hover in the range of 6.25 percent to 6.4 percent by the end of the year, he says.
Will my mortgage go up in 2024? ›
The mortgage rate forecast for 2024 is that rates are expected to go down, although it may take longer than had previously been hoped. In May 2024 we have seen rates on fixed-rate mortgages increase for several months following many months of rates falling. However, the picture could soon improve for homeowners.
What's the minimum FICO score for an FHA loan? ›
The Takeaway
To qualify for an FHA-insured loan, you need a minimum credit score of 580 for a loan with a 3.5% down payment, and a minimum score of 500 with 10% down. However, many FHA lenders require credit scores of at least 620.
Can I get an FHA loan with a 550 credit score? ›
Home buyers with a credit score at or above 580 can borrow up to 96.5% of a home's value. While borrowers with credit scores of 500 – 579 may still qualify for an FHA loan with a 10% down payment, many lenders have their own minimum credit score requirements.
