Minimum FHA Credit Score Requirements – 500 – 600 Range Approval Process

Finding an FHA loan with around a 500 credit score is a challenge!

In this article, we’ll show you how you can utilize your credit score even around the 500 level to get the loan you want. Let us help you get prequalified.

You’re going to learn:

    • What is the minimum FHA credit Score requirement?
    • How Lenient is the FHA with down payments?
    • How Investor Overlays affect your credit score requirements

You probably already know the minimum FHA credit score to receive a home loan is technically 500. You probably don’t know that it is also possible to receive a mortgage loan without having a credit score.

When you get an FHA loan, there’s no credit score required. Whereas other conventional loans, VA loans, and USDA loans have a minimum credit score requirement of 620. Of course, there can be some exceptions if someone has a legitimate reason; it all depends on the situation.

What is the Minimum FHA Credit Score Required?

Minimum FHA Credit Score Requirements, 580 credit score home loans

If you are looking to receive an FHA home loan, lucky you, it is much easier this year. You may have been unable to receive a loan because your credit score fell just below a certain limit. However, major lenders will now be approving borrowers if they have FICO scores of at least 580.

This is 60 points lower than the minimum home loan credit scores of 2014. FHA lenders would require FICO scores of at least 640. This announcement is just in time, too. FHA home loans are in demand right now! FHA also has a very lenient down payment minimum of 3.5%, which is much better than many other backed-loans. And it hasn’t been changing for quite some time now. So, stability is all about FHA.

In addition, they are much more forgiving and able to work with you versus other mortgage loans.

With this drop in minimum FHA credit scores required, you will be able to get the loan you need. Even if you might have been under the minimum home loan credit score requirement in the past, this shouldn’t stop you.

The economy has been steadily declining so it is time we got a break and FHA listened. This is just the break homeowner’s need! Whether you are looking to get a loan for your very first home or you’re in need of a home loan for your next home, you’ll be able to get it without worrying so much about the minimum FHA credit score.

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FHA Lenient Down Payment Policy


Home loans are at the core of the housing market. Without them, people would be unable to get enough money together to be able to start paying on their new homes or get a big chunk paid off to be able to afford living there. So, it can be difficult to pay off your home and the loan at the same time. With FHA’s loans, you’ll only be paying a 3.5% down payment. This allows you to pay off a bit at a time so you won’t be running your bank account into the ground while trying to get back on your feet!

With the announcement of the 60 point minimum FHA credit score drop, it’s easy to see how much FHA is willing to work with people! FHA guidelines say that if you are looking to buy a home, you must be able to make at least a 3.5% down payment on the home’s price. Thus, they can be sure you are going to follow through with the purchase. FHA loan limits can range from $271,200 for a one-family house to $1,202,925 for a 4-unit home; that’s quite a big range.


More Approvals Will Be Seen Because of Less FHA Investor Overlays


The FHA mortgage guidelines tell which loans lenders will and will not issue. Though, lenders in the US don’t underwrite loans exactly how the FHA guidelines say they should. Lenders can make their own restrictions through investor overlays. These overlays can make it much more difficult for someone looking for a loan to get approved.

One important overlay has a lot to do with credit scores for home loans. The guidelines say that they will insure home loans for any person with a credit score of at least 500. The banks are not as willing to follow through with what the FHA thinks. The banks see people with a credit score of 500 as liabilities. Most people with a credit score of 500 are likely to default in the next six months, which will damage a bank’s FHA default rate.

So back in 2011, most banks started requiring minimum home loan credit scores of 640. It has been lowered since then, but it is not where it should be yet. However, it is getting there! The 60 point drop brought it down to 580! The domestic economy has started to improve while the US housing industry is expanding. So, we might even see a minimum FHA credit score drop down again pretty soon!

FHA has been the best choice for most homebuyers in America because of how flexible and willing to cooperate they are. It looks like they are still working hard to keep that reputation among other banks sticking to their rigid ways. This drop in the minimum FHA credit score requirements could be just what a new home buyer needs to purchase their very first home. The FHA loan requirements 2020 should be taken advantage of by all those looking to buy a new home.

FHA Minimum Credit Score Requirements FAQ

Ask away!

What is The Minimum Credit Score For an FHA Loan?

The absolute minimum is 500, but to get the best rates borrowers should look to have at least 580+. Those under the 580 mark will need to come with an additional down payment of up to 10% of the loan in order to offset the increased risk for the lender, while those at 580 will only need 3.5%.

Does Having an Acceptable Credit Mean I’m Automatically Approved?

No, there is still a range of other factors that go into approving any type of loan including the FHA back ones. For example, an individual with good credit might have too low of an income to be approved for a larger loan.

There are also lender specific requirements, so while a low credit score might be fine for some others might not approve it.

Who Approves FHA Loans?

FHA loans are provided and approved by specific 3rd party lenders. Each lender has their own set of requirements, so the ability to secure a loan can change from lender to lender.

Can I Qualify For an FHA Loan With No Credit?

Yes, FHA loan lenders cannot deny someone solely on the basis that they have no credit history. In cases like this, lenders will look to non-traditional credit sources likes utility payments to ensure that the potential borrower has an on-time payment record of at least a year on them.

Additional Resources for Minimum FHA Credit Score Requirements

FHA Loans Illinois
FHA Loan in Oregon
FHA Loans in New York

Mike Plambeck

Michael Plambeck, the founder and owner of Home Loans For All, bridges the gap between our content team and our industry team by being an expert in both areas. Michael is a home loan expert who has worked closely with loan officers and realtors for over four years, and who is engaged in constant continuing education to make sure that he’s up-to-date on all real estate laws and regulations.

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