The FHA loan program can help you buy a house even if you have poor credit. FHA home loans are backed by the Federal Housing Administration, which allows lenders like Freedom Mortgage to offer loans to customers who may have lower credit scores.
What is the lowest credit score for FHA loans?
You generally need a credit score of at least 540 to qualify for an FHA loan. Your credit score can also affect the amount of money required for your down payment. Many lenders follow these credit score and down payment guidelines for FHA loans:
|Credit score||Between 540-579||Over 580|
If you have a lower credit score and smaller down payment, FHA loans may be more affordable than conventional loans. Lenders often require a credit score of at least 640 and a minimum down payment of 5% to qualify for a conventional loan.
Keep in mind you will need to meet credit, income, and financial requirements to get approved for an FHA loan. Read more about the requirements for FHA loans here.
Applying for an FHA loan with poor credit
If want to apply for an FHA home loan but are concerned about your credit score, here are things you can do to prepare for the application.
Check your credit report and credit score
Your credit report includes how much debt you have from things like auto loans and credit cards. Before you apply for an FHA loan, check your credit report as well as the balances on your other debts. Try to pay these debts down if you can.
Payment history is another important part of your credit score. Making regular, on time payments for loans and credit card bills can help lenders look more favorably on your mortgage application.
Put together a budget
When you are buying a house, it’s important to make a budget to help you decide how much home you can afford. You’ll want to be confident you can afford your monthly mortgage payment as well as the other bills you need to pay.
Your monthly mortgage payments include interest, principal, homeowner’s insurance, property taxes, and mortgage insurance premiums when you have an FHA loan. Use our mortgage affordability calculator to help you estimate how much home you can afford.
Plan for a down payment
One FHA loan benefit is the low down payment requirement. You can increase your chances of having your loan application approved by making a larger down payment, however. Plus, making a larger down payment will save on interest payments, because you will borrow less money to buy your home.
Ask Freedom Mortgage about FHA loans
Freedom Mortgage specializes in FHA loans and we’re dedicated to helping you realize the dream of homeownership. Ask us if an FHA loan is a good choice for you. Visit our Get Started page or call one of our helpful Loan Advisors at 877-220-5533.