While the 580 FICO score minimum is a major factor in how an applicant will pay for a mortgage, your credit score is not the only thing the FHA takes into account.

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FICO Scores Over 580 Help Borrowers Qualify For FHA Loans

Homebuyers looking to take advantage of great FHA loan benefits should already know they need to establish the best possible credit rating. Applicants with a better credit rating increase their options for mortgage or refinance loans. In order to qualify for the low 3.5 percent FHA loan down payment, applicants will need a FICO score of at least 580. Those that don't meet that criteria will have to put a down payment of 10 percent on the mortgage they want.

FHA loans are designed to help homebuyers, so these government-insured loans usually come with more lenient requirements than typical mortgages or refinancing terms from traditional lenders. While the benefits don't vary much between someone with good credit and excellent credit, there is a very noticeable margin for those with bad credit and average to good credit.

Why You Need a Better Credit Score

While the 580 FICO score threshold is a major factor in how an applicant will pay for a mortgage, your credit score isn't the only thing the FHA takes into account. Payment history, bankruptcies and foreclosures are also issues that the agency looks at. While these factors may hurt your credit score, they don't necessarily eliminate you from loan eligibility.

That doesn't mean, however, that you can neglect your credit. While the FHA is lenient enough to help those with bad credit ratings, they also require recent credit history to be in good standing.

Extenuating circumstances like job loss, injury or anything else that prevented you to pay in a timely manner can, and most likely will, be taken into account. However, if you have demonstrated you purposely neglected payments or your credit rating, your chances of qualifying for an FHA loan will be reduced.

Be Safe, Not Sorry With Your Credit

Obviously, it's better to have good credit than bad credit when applying for any loan. Don't take your credit history for granted, though, because you might find an error or inaccuracy that could hurt your chances of qualifying for an FHA loan. Instead of going through the headache of disputing your application with your agency and holding up the process, be proactive and make sure your credit score and ratings are where they should be before approaching the FHA.

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FHA Loan Articles and Mortgage News

Waiting Periods Before Applying for Your FHA Loan

February 21, 2024 - Borrowers who have missed mortgage payments or rent payments went from salary to contractor status, and those who have filed for bankruptcy may all have to build in some extra time before applying for a mortgage. We examine some common scenarios below.

Using Escrow for Your FHA Loan

February 14, 2024 - You may wonder why your loan officer might require you to use an escrow account. Escrow is an agreement between you and the lender through which a third party holds an asset or money on behalf of two other parties that are in the process of completing a transaction.

Home Loan Down Payment Issues You Should Know

February 9, 2024 - There are conventional mortgages, VA loans, FHA home loans, and USDA mortgages. Each home loan program has its own requirements, guidelines, and fees, but the down payment is one of the big ways all these programs differ.

How Long to Wait Before You Apply for a Home Loan

February 1, 2024 - Some people can apply for a new line of credit right away. They have great credit and repayment habits, and lenders love them. But plenty of us don’t fall into that neat little category, especially in the wake of the pandemic economy that burdened so many people during COVID.

Learn More About FHA Loan Cash To Close

January 30, 2024 - Use an online mortgage calculator to estimate how much home you can realistically afford. Borrowers sometimes view that number as a bit flexible. However, be careful of what some in the industry describe as cost creep.