March 3, 2021

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FHA Loan Reader Questions: Credit Scores

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A reader asks, “My credit score is in the ‘poor’ range (low score 475. Hi score 585) and I will need assistance with down payment. However, I have an excellent income and have been on the job over 15 yrs. I have recently been approved for an auto loan which I am using to I prove my credit scores. Might I qualify for FHA, and what assistance is available for the down?”

The FHA has rules about minimum credit scores needed for FHA loan approval. According to the FHA official site:

“When a credit score is available, it must be used to determine eligibility for FHA insured financing. The score that is used to determine eligibility is called the ‘decision credit score’.

When the credit report reflects:
• 3 credit scores (one from each repository) – the middle score is used
• 2 credit scores – the lower of the two scores is used
• 1 credit score – that score is used”

What is the FHA standard for loan approval? For “typical” new purchase FHA loans, the following applies:

“DECISION CREDIT SCORE and LTV

Case Numbers Assigned on or after 10/04/10 , when the decision credit score is:

• 580 and above: Maximum financing
• 500-579: Maximum LTV 90.00%
• 499 and below: Not eligible for FHA insured financing”

The FHA official site adds, “A transaction where one borrower has only “nontraditional credit” and the other has a decision credit score of less than 500 would also be ineligible.” It’s very important to point out that these credit scores are FHA minimums–the lender is free to require higher credit scores that don’t necessarily match the FHA minimum guidelines printed here.

FHA loans do not feature FHA provided down payment assistance. There may be such programs available on a state or local level, but such programs would need to meet FHA guidelines in order to be eligible. Borrowers should contact the FHA directly or speak to a loan officer to learn more about the down payment requirements for FHA insured mortgages.

Do you have questions about FHA home loans? Ask us in the comments section.

Joe Wallace - Staff Writer

By Joe Wallace

May 30, 2013

Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.

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FHANewsBlog.com was launched in 2010 by seasoned mortgage professionals wanting to educate homebuyers about the guidelines for FHA insured mortgage loans. Popular FHA topics include credit requirements, FHA loan limits, mortgage insurance premiums, closing costs and many more. The authors have written thousands of blogs specific to FHA mortgages and the site has substantially increased readership over the years and has become known for its “FHA News and Views”.

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