start portlet menu bar

Web Content Viewer

end portlet menu bar

FHA loans for bad credit scores

Buying and refinancing homes with FHA loans

60% Complete
FHA loans for bad credit scores

The FHA loan program can help you buy or refinance a house even if you have a bad credit score. 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?

At Freedom Mortgage, our minimum FHA loan credit scores depend on whether you want to buy a home or refinance a home.

  • We can often accept a minimum credit score as low as 600 when you want to buy a house with an FHA loan.
  • We can often offer an easy credit score qualification when you want to refinance a house with an FHA loan.

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 620 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.

Can you refinance an FHA loan with bad credit?

FHA homeowners with lower credit scores may still be able to refinance using the streamline program. This program allows you to replace your current FHA loan with a new FHA loan that has a lower rate or better terms. These refinances feature less paperwork, more flexible credit standards, and faster closings.

At Freedom Mortgage, we help FHA homeowners refinance with an easy credit qualification. You will need to meet our financial requirements to get your refinance approved. You need to be current on your mortgage payments and have a recent history of paying your monthly bills on time. Refinancing also must result in a real benefit, such as lowering your interest rate which reduces your monthly mortgage payment. By refinancing, the total finance charges may be higher over the life of the loan.

Freedom Mortgage is the #1 FHA lender in the US1 and we are currently offering FHA streamline refinances to homeowners across America.

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 on your FHA loan, however. Plus, making a larger down payment will save on interest payments, because you will borrow less money to buy your home.

FHA loans after bankruptcy

Having a bankruptcy in your financial history can also affect your credit score. The good news is the FHA loan program can still help you buy a home after bankruptcy and it can be easier to get an FHA loan after bankruptcy compared to a conventional loan. The requirements are different depending on the type of bankruptcy:

FHA loans after Chapter 7 bankruptcy

If you’ve filed and been discharged from Chapter 7 bankruptcy, you can still apply for an FHA loan under specific conditions. If two or more years has passed since your bankruptcy has been discharged and you have “reestablished good credit” or have not incurred new credit obligations, you can apply for an FHA loan. You will still need to meet the lender’s other credit, financial, and income requirements to be approved.

You can still apply for an FHA loan after Chapter 7 bankruptcy if more than 1, but less than 2 years have passed, although you will need to meet additional requirements. These include demonstrating that the bankruptcy was caused by circumstances out of your control and providing recent documentation of your ability to responsibly maintain your finances.

FHA loans after Chapter 13 bankruptcy

Since Chapter 13 bankruptcies involve a repayment plan, some borrowers may be eligible for an FHA loan before the repayment plan is complete. If a year has passed and you have made all payments in full and on time, you can apply for an FHA loan. This may require written documentation from the bankruptcy court with their approval. Just like Chapter 7 bankruptcy, you will still need to meet your lender’s credit, financial and income standards in order to be approved.

Ask Freedom Mortgage about FHA loans

Freedom Mortgage is the #1 FHA lender1 in the United States. We're dedicated to helping you buy or refinance a home with FHA loans. Ask us if we can help you. Visit our Get Started page or call one of our helpful Loan Advisors at 877-220-5533.

1. Inside Mortgage Finance, Jan-Sept 2021

start portlet menu bar

Web Content Viewer

end portlet menu bar

Contact Us

Get started today by getting a personalized evaluation of your home loan options from Freedom Mortgage.

877-220-5533