The minimum credit score required for an FHA loan is 500, however, borrowers with a credit score of 580 or higher are eligible for maximum financing and a lower down payment of 3.5%. Borrowers with credit scores between 500-579 can still qualify for an FHA loan, but they will be required to make a larger down payment of 10%. Additionally, borrowers with credit scores below 500 will not be eligible for an FHA loan. It’s worth noting that lenders may have higher credit score requirements and may require a higher down payment even if the borrower meets the minimum FHA requirements.
There are several benefits of an FHA loan:
- Low down payment: FHA loans require a down payment as little as 3.5%, making it easier for borrowers to qualify for a mortgage.
- Flexible credit requirements: FHA loans have more flexible credit requirements than conventional loans, making it easier for borrowers with lower credit scores to qualify.
- Lower interest rates: FHA loans typically have lower interest rates than conventional loans, which can result in lower monthly payments and a lower overall cost of the loan.
- Non-occupying co-borrower: FHA loans allow a non-occupying co-borrower to co-sign the loan, which can help a borrower with a lower credit score or income to qualify for a loan.
- Mortgage insurance: FHA loans require mortgage insurance, which can be more affordable than private mortgage insurance (PMI) required by conventional loans.
- Easy to refinance: The FHA offers several programs to help borrowers refinance their mortgages, even if they have little or no equity in their homes.
- Available for all types of properties: FHA loans can be used to buy single-family homes, as well as multi-unit properties, manufactured homes and even some condominiums.
- Available for Energy Efficient Homes: FHA has a loan program for Energy efficient homes, called the Energy Efficient Mortgage (EEM) program. This allows borrowers to finance the cost of adding energy efficient features to the home.
