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FHA loans may be particularly appealing to first-time home buyers who have a young credit history as well as people with more experience but a few credit blemishes. Part of the attraction can be attributed to the more lenient credit requirements associated with an FHA loan.

This blog post will go over what you need to know if you’re considering an FHA loan to buy or refinance a home.

Credit Score Required To Buy A House

Before we get into the credit requirements for FHA loans, it’s useful to take a step back and look at credit requirements in order to get a feel for credit dynamics in the mortgage industry.

For a standard conventional loan backed by Fannie Mae or Freddie Mac, you need a median FICO® Score of at least 620. It’s important to remember that there are three major credit bureaus who play a role in this process: Equifax®, Experian™ and TransUnion®.

Notice that I said “median score.” If there’s more than one person on the loan, it’s the lowest median credit score that counts. For example, if you have scores of 720, 690 and 650 while your significant other has scores of 660, 630 and 610, the score that counts will be 630.

The USDA doesn’t set a minimum credit score requirement, but lenders can set their own policies. For those looking to live in qualifying areas, the median FICO®Score required by Quicken Loans is 640.

Similarly, the VA has no minimum credit score policy in place. Again, it’s up to the lender. The median score required by Quicken Loans for a VA loan is 620.

Beyond simple qualification, your median FICO®Score plays a major role along with your down payment in the interest rate you receive. The higher your score and the higher your down payment, the better interest rate you can expect.

Minimum Credit Score Required For An FHA Loan

Technically you can get approved for an FHA loan with a median FICO® score of as low as 500, but there are some serious drawbacks to an FHA loan with a score that low.

The first is that you’ll need a down payment of at least 10%. Secondly, when qualifying with a score that low, it’s considered a subprime loan. What that means from a practical perspective is that even if you can get the loan, you won’t get the best terms and could end up with a much higher rate.

Finally, you have to have some very low qualifying ratios. In order to qualify with a median FICO® Score of below 580, you need to pay close attention to two ratios: your housing expense ratio and your overall debt-to-income ratio (DTI).

Your housing expense ratio is calculated as follows:

 DTI equation

The amount being spent monthly on housing expenses can’t exceed 31% of your gross income.

DTI takes into account all debts including your mortgage. That’s calculated with the following formula:

With a median FICO®Score below 580, your DTI can’t go over 45% of your gross monthly income. These two ratios have a major impact on how much house you can afford.

In addition to the restrictions laid out above, it’s important to note that very few lenders offer these subprime FHA loans. At Quicken Loans, you have to have a median FICO®Score of at least 580 in order to qualify.

The Benefits Of A Higher Credit Score

If you have a median FICO® Score of 580 or higher, the first benefit is that you’ll have more lenders competing for your business including Quicken Loans. Options mean better loan terms including more competitive interest rates.

Secondly, if your score is better than 580, you’ll only have to make a down payment of 3.5%. This could significantly open up your housing options. It’s worth noting that you’ll have mortgage insurance premiums for the life of the loan if you make an initial down payment of less than 10%. On the other hand, you’ll pay for mortgage insurance for 11 years with a down payment of 10% or more. However, one of the options you may have down the line in order to get rid of mortgage insurance is to refi into a conventional loan once you reach 20% equity.

If you have a FICO® Score of 580 but below 620, you’ll need to maintain a housing expense ratio of no more than 38% of your gross income and a DTI of no more than 45% in order to get an FHA loan through Quicken Loans.

If you have a median FICO® Score of 620 or better, higher DTIs are allowed than what otherwise might be allowed on many other loans. While there’s no hard maximum that applies to everyone, the DTI for borrowers with higher credit scores is based on your credit score range as well as the size of your down payment, among other factors. In no event will the FHA approve a DTI above 57%, but this could offer more budget flexibility than many other mortgage options.

FHA Credit Score Requirements May Vary

The credit scores and qualifying ratios we’ve mentioned in this post so far are either the minimums required by Quicken Loans or the FHA itself. Other lenders may have their own requirements including, but not limited to, higher FICO® Scores or a larger down payment.

In any case, we encourage you to shop around for the best loan terms and make sure you’re comfortable before moving forward.

Can You Get An FHA Loan With No Credit History?

If you’re applying for any kind of mortgage, including FHA, it’s a good idea to have at least two or three accounts open and reporting on your credit whether those are revolving accounts like credit cards or monthly loan payments. However, it’s possible to get an FHA loan with a thin or nonexistent traditional credit history. Before moving forward, there are some things you should know.

These loans are manually underwritten, and that means your mortgage process can take longer. In order to get an FHA loan with no credit history from Quicken Loans, you need to have a minimum of three nontraditional credit references. Those references have to include at least one of the following:

  • Utilities not reporting on the credit report (gas, electricity, water, cable or internet)
  • Telephone service
  • Rental housing payments

The other two references may come from any of the following:

  • Insurance premium that’s not payroll deducted (Medical, Auto, Life and Homeowners/Renters)
  • Child care payments
  • School tuition
  • Retail store credit cards (department, furniture, appliance, etc.)
  • Rent-to-own (furniture, appliances, etc.)
  • Portion of medical bills not covered by insurance
  • Car leases
  • Personal loans from an individual with repayment terms in writing that can be supported by cancelled checks
  • You can show a documented 12-month history of savings by regular deposits resulting in an increasing balance to the account. The account has to show at least quarterly deposits which aren’t payroll deducted. There should be no fees for nonsufficient funds.
  • You can also document a year’s worth of payments you made to an account on which you’re an authorized user. 

Finally, because you have no credit history, you’ll have to keep your DTI low. Quicken Loans requires a housing expense ratio no higher than 31% and a total DTI of less than or equal to 43%.

Learn More About FHA Loans

For more on FHA loans including the advantages of the FHA option and how it works, we invite you to check out this page on FHA loans.

If you’d like to see how FHA or another mortgage option could work for you, you can apply online with Rocket Mortgage® by Quicken Loans or give one of our Home Loan Experts a call at (800) 785-4788.

 

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This Post Has 405 Comments

  1. My credit score is around 700+. The main reason it’s so low is that I haven’t had an open account for a long time. I typically pay cash for everything. I’m in IT, loving the work I do and making an industry average of $70,000/yr. I want to buy foreclosure property that would require some fixing up (would like this included in the loan) Ultimately the home value would be around 20%, or above, total investment including the fix up costs. I’d like to put down as little as possible to ensure I always have enough cash available. Total loan with improvement costs I’m looking for is $150,000 – 170,000.

    Should I open credit card accounts to boost my score before I look? If I open two credit accounts, how long before my score improves to excellent?

    1. Hi John, Thanks for reaching out to Quicken Loans. Your score is strong if it is 700+. One of our home loan experts will contact you soon to see if there are options available for you.

  2. My husband and I are looking to get into a home of our own. We have found a house with a list price of 197,400. My credit score is in the mid 600s but my husbands is currently 571. We know for a FHA a 580 is required and we are hopeing it will be there very soon seeing as how we have recently taken care of somethings that were negatively impacting his score. My husband has a good secure job with a steel mill with an income of about 80,000. While we know we have to wait a little bit for his score to move up a few points , I was just wondering once that happens if your company may be able to help us with a FHA loan. Thanks!

    1. Hi Emily, thanks for reaching out to us, one of our home loan experts will be contacting you with more information.

  3. Can anyone help me, i keep getting disapproved. I have a 625 credit score, and also am VA qualified if I can go that route. My fiancee credit score is 640 but is not a vetran. Are u all able to help. We have 4K downpayment, which isnt alot, but would really like to move by Jan 2013.

  4. My hubby and I are trying to buy our first home. He’s retired NAVY full bene’s and we already have our COE for a VA loan. We have had no slow pays for more than a year, and not counting MY student loans are DTI is around 29%. Both of our midscores are 655 and 605, is it possible for us to obtain a loan for a home between 290K – 315K. I don’t believe our income will be an issue at all as we’ve got a combined total of about 13K a month.

    1. HI Marie, thanks for reaching out to us, I’ve forwarded your request with one of our home loan experts who will contact you soon. Thanks!

  5. Hi, I am a first time buyer. I am a hairstylist and my first 2 years I was paid under the table. I started getting paid in January by pay checks but it does not show all my tip income. Is there anyway to receive a loan w out W2 forms ?

    1. Hi Meghan, it’s going to be difficult to qualify if there is not a documented history of income, but I’m going to forward your request to one of our home loan experts who will contact you. Thanks

  6. I have credit scores of 627, 607 and 607. I have had some credit issues but have made arrangements to pay things off. I am looking to secure a FHA loan for 60K to 75K. I am
    a first time home buyer looking to purchase a condo. I make 18.00 an hour and I would like to purchase within the next 6 months. Would Quicken Loans be able to help me with my financing needs?

    1. Hi Holli, thanks for reaching out to Quicken Loans, I have forwarded your request to one of our home loan experts who will contact you soon to see if we can be of assistance, thanks!

  7. Hi I just went through the HAFA refinance on my current home but I still cannot afford it. I have a renter as soon as I can find a new place. My FICO was 790 until 2008, when the recession hit and I ran behind due to many reasons (divorce,dramatic loss of income, medical care for my mother who passed away recently). There are some old collection accounts from 2009. My FICO score is now about 600, I have 10-20% down. The kicker is I am SELF employed for 12 years. Income is steady and on the rise now. I have no car payment or credit cards now except one with a very low limit. I use it and pay it off each month to help build my credit up again.

    Would I ever be considered for an FHA?

    1. Hi Cynthia, Thanks for giving us a bit about your financial background, there are several factors that determine qualification, so I’ve forwarded your request to one of our home loan experts who will contact you and see if we can be of assistance. Thanks for reaching out to Quicken Loans.

  8. Hi, I would like to see if this would be an option for us, scores are approx 580 and on the rise as we pay off stuff, debt to income is great, looking to purchase 200k have 10% down as of now, thank u!

    1. Hi Ashlee, thanks for contacting us. I have forwarded your request to one of our home loan experts who will contact you to see if we can help! Have a great weekend!

    1. Thanks for your question. I’ve passed it on to one of our Home Loan Experts who will get in touch with you soon. Have a great day!

  9. Hey,
    We are looking to get a home loan for 150000. My husband make 36k and I make 41k a year. My cs is 535 to 560 and his cs is 600plus. We are trying to get pre approve to purchase this home within 45 days. We have 6k for down payment. Do you think you could help

    1. Thanks for reaching out to Quicken Loans. I’ve passed your question on to one of our Home Loan Experts who will be contacting you soon.
      Thanks again!

  10. I am wanting a refinance on my loan and my middle score is a 580 I have a 1st and 2 nd and want combine thanks

    1. Hi Brian, thanks for reaching out to us, I have forwarded your request to one of our home loan experts who will contact you shortly, thanks.

  11. My husband and I are looking to buy… We make around $110k/yr, and credit scores are now on the rise. Mine used to be in the low 500’s, but just this month jumped to 631/606/580. His scores are about the same, however he just paid something off and I believe his score will jump up higher than mine now. We are looking to purchase around $ 225k. Also, his name is still on the mortgage with his ex wife… Could we do FHA?

    1. Hi Beth, thanks for reaching out to Quicken Loans, I forwarded your request to one of our home loan experts who will contact you shortly. Have a nice day!

  12. Hello, i believe my middle credit rating is about 680 or better. My wife and i make near or above 100,000 annually. We are not first time home buyers. Can you help my wife and i?

    1. Hi Hamilton,
      Thanks for reaching out to Quicken Loans, I have shared your comment with one of our home loan experts who will contact you shortly to see if we can be of assistance. Thanks and have a great day.

  13. I am looking for FHA loan with middle score of 580. Looking to purchase house for about 95,000. Have 5 percent down. Recently paid off some debts to allow for payment. Also moving to town where I work will save about 200 per month just on gas. Now renting and paying about 850 with utilities. Please let me know if u can help.

    1. Hi Emily, thanks for reaching out to Quicken Loans, I have forwarded your request to one of our home loan experts who will contact you soon to see if we can be of assistance, thanks and have a great day!

  14. Hi my husband and I are looking to buy our first home. I work part time and have a cs of 588 592 and 600 my husband works full time and his scores are slightly lower than mine. We have recently paid done some credit repair and are waiting for our scores to reflect that. We really want to purchase while prices and interest is low. We live in an area that was hit pretty hard by the economy and homes are going for really cheap.

    1. Hi Krystal, thanks for reaching out to Quicken Loans. I have forwarded your message to one of our home loan experts who will contact you shortly to see if we can be of assistance. Thanks and have a great day!

  15. Hi, I am interested in a loan for 130,000. We are first time home buyers. My credit score is a 613 my husbands is not so good. Our yearly income is 73,000.

    1. Hi Alissa, I will pass your message on to one of our home loan experts who can contact you about purchasing a home. Thanks for reaching out to Quicken Loans and have a great weekend!

  16. Hello i am interested in a loan of 85 ,000 have a credit score of 580 627 and 613. I am a first time home buyer and want an fha loan…….

    1. Hi Brian, thanks for reaching out to us, I will pass your information along to one of our home loan experts who will contact you shortly. Thanks and have a great day!

  17. I’m a Frist time home buyer looking for a loan of 75 to 80k income 1920 a month before taxes no debt credit score 646 two charge offs on credit report collectors paid infill. Could I be approved for FHA lone.

    1. Hi Jason, thanks for reaching out to Quicken Loans. I’m going to share your message with one of our top home loan experts and he’ll be in touch shortly. Thanks and have a great day!

    1. Hi Derrick, thanks for reaching out to Quicken Loans. I will have one of our home loan experts contact you shortly to see if we can be of assistance. Thank you!

  18. Hello, I’m looking at getting an FHA loan. My credit is also horrible but I believe it’s close to 580. My wife and I rent a home for $900 a month but are looking to get into our house. Our income is around REMOVED Gross. I would love to hear from someone.

    Thanks,

    Drew

  19. Hello
    I am wanting to buy a property. First time home buyer never owned a home. Mortgage is 42k. Salary is 33k. I have 1 monthly debt $380.00. I currently rent for $659.00. My credit score is horrible, but I know something can be done.

    Please let me know if you can help
    Thanks

  20. I am in search of a lender who issues FHA HUD 203 loan. I am looking at a property that is in foreclosure and in need of repairs and rehabilitation. the total cost will be under $100,000.00.
    My credit score is 603.

    Please contact me by E-mail as I have a hearing problem and find it difficult to communicate by phone.

    1. Hi Kevin,

      Unfortunately we are not doing any 203k loans at this time. Good luck to you and please keep us in mind in the future!

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