When you are looking to buy or refinance a home with an FHA loan, it is important to know your credit score. Your credit score helps lenders like Freedom Mortgage understand how you manage your finances and it affects the interest rate we may be able to offer you.
The minimum credit score often required by lenders to qualify for an FHA loan is 540. At Freedom Mortgage, our current minimum FHA loan credit scores are higher.
- When you want to buy a home with an FHA loan, we can often accept a minimum credit score as low as 600.
- When you want to refinance a home with an FHA loan, we can often accept a minimum credit score as low as 550. We offer FHA streamline refinances for FHA loans.
Note that credit score is just one of the measures we use to decide whether you meet the requirements for an FHA loan. You need to meet credit, income, and financial criteria to get approved for a mortgage.
Your chances of getting approved for an FHA loan are better if you have a higher credit score. But you can still get approved with a lower credit score and you may qualify even if you have a bankruptcy or foreclosure.
FHA credit score requirements and down payments
Another advantage of FHA loans is their low down payment requirements. Your credit score can affect how much you have to pay, however. If your credit score is between 540 and 579, you will frequently need to make a 10% down payment. If your credit score is 580 or higher, you can often make a down payment as low as 3.5%. Other FHA loan requirements include:
- Debt-to-income ratio. Lenders frequently want your debt-to-income ratio to be less than 43%. This means that your total debt should not exceed 43% of your monthly income.
- Proof of income. While there are no minimum income requirements, you will need to document you have income sufficient to pay your monthly mortgage bills
- Loan limits. The Federal Housing Administration limits the amount of money you can borrow with an FHA loan to finance a house.
- Mortgage insurance. You will need to pay an upfront mortgage insurance premium of 1.75% of the purchase price of the house. This upfront premium can often be rolled into the total loan amount. In addition, you will need to pay annual mortgage insurance premiums (“MIP”) that typically cost between 0.45% and 1.05% of the loan amount. If your down payment is less than 10%, the annual MIP will last for the life of the loan.
Ask Freedom Mortgage if you qualify for an FHA loan
Freedom Mortgage is the #1 FHA lender1 in the United States. To get started with your FHA loan application, contact a Freedom Mortgage Loan Advisor by visiting our Get Started page or calling 877-220-5533.
1. Inside Mortgage Finance 2020.