What credit score do you need for an FHA loan?

If you’re thinking about buying a home but you’re worried about credit score requirements, an FHA loan might be the right solution for you. Backed by the Federal Housing Administration, FHA loans are designed to help more Americans achieve homeownership thanks to their flexible requirements. While your credit score plays a big role in your loan application, homebuyers with low credit scores—and even those without credit scores entirely—could benefit from an FHA loan.

In this article, we’ll break down the credit score requirements for FHA loans, how different score ranges affect your options and what you can do to qualify for the best terms.

• To be eligible for an FHA loan with Guild, you’ll need a credit score of 540 or higher. However, this comes with limitations: You must make at least a 10 percent down payment.
• Your debt-to-income (DTI) ratio must be around or below 43 percent.
• Lenders may apply overlays or additional requirements.

580 and above: more options, less down payment

If your credit score is 580 or higher, you can qualify for the standard FHA down payment of just 3.5 percent. This is one of the most attractive features of the FHA program.

Guild also offers down payment assistance programs like Zero Down, which combines an FHA mortgage with a second mortgage to cover down payment and closing costs*. This program, along with other specialty financing offers, requires credit scores of 600 and up.

Aspiring homebuyers without credit scores still have a viable path to homeownership, thanks to Guild’s Complete Rate program. Available for both FHA and VA financing options, first-time homebuyers can qualify by providing bank statements showing regular income deposits and monthly payments, such as rent and utilities.

Depending on the loan type, a down payment between zero to 3.5 percent may be required. Applicants could receive lower interest rates and potentially benefit from reduced loan fees.

1. Down payment

As noted, your credit score directly impacts the minimum down payment:

• 540–579: 10% minimum down payment
• 580+: 3.5% down payment

2. Interest rates

While FHA interest rates are generally lower than conventional loans, higher credit scores still help you qualify for better rates and terms.

3. Mortgage Insurance Premium (MIP)

All FHA loans require MIP, no matter how much down payment you provide. This is in contrast to Conventional loans, where paying more than 20 percent down payment exempts you from the Private Mortgage Insurance (PMI) requirement, However, higher credit scores may lead to better loan offers and lower monthly payments overall.

Even if you meet the credit score requirements, lenders also look at:

• Employment history (typically two years)
• Income stability
• Debt-to-income ratio (generally below 43 percent)
• Property appraisal (must meet FHA standards)

Want to increase your chances of qualifying for better terms? Here are actionable tips to boost your credit score:

1. Pay bills on time
2. Pay down existing debt
3. Avoid opening new lines of credit
4. Check your credit report for errors
5. Become an authorized user on someone else’s good credit account

The FHA loan program is one of the most accessible options for homebuyers with less-than-perfect credit. At Guild, they’re one of the most attainable loans available, open to borrowers with credit scores of 540 and higher. Before applying, take time to understand your credit situation and explore ways to strengthen it so you can be presented with the best loan terms possible. When you’re ready, consult with a loan officer to find out which loan options work best for your financial situation.