FHA loans can be the long-sought answer for first-time home buyers with lower credit scores and low down payments. The question remains, though: Do you have a credit score that would qualify you for an FHA loan? Here’s what you need to know.
Lowest allowable credit score: 500
You must have a credit score of 500 or higher to qualify for a Federal Housing Administration loan. And even with that, you won’t get the full low-down-payment benefit that FHA borrowers with higher scores will.
Better credit score = lower down payment
With a credit score of 500 to 579, the minimum down payment on an FHA loan is 10%. But with a credit score of 580 or higher, the minimum down payment is just 3.5%.
» MORE: Get your credit score for free
Required scores can vary by lender
The credit score thing may seem pretty cut and dried, but hang on. These are the FHA's minimum requirements. Lenders may adopt stricter requirements, and often do, says Brian Sullivan, spokesman for the U.S. Department of Urban Development, which oversees the FHA. To make sure you get the best FHA mortgage rate and loan terms, shop more than one FHA-approved lender and compare.
» MORE: Overview of FHA loan basics