Qualifying for an FHA Mortgage: What Your Credit Score Should Look Like
08/26/2010 The FHA itself is not involved in setting qualification standards for all lenders, and as a result, the FHA doesn't require a specific credit score. Rather, lenders who offer FHA mortgages may specify some of their own requirements, within reason. An fha mortgage will always come with a lower credit score requirement than any other type of mortgage, even a VA home loan. The FHA insures such mortgages against default, which allows lenders to work with riskier borrowers.
Typically, lenders aren't bothered by charge-offs, collections, or late payments that appear on credit reports, unless those late payments occurred in connection with a previous mortgage. Overall credit score is usually sufficient for lenders to arrange loan terms. The specifics included on the credit report are often not as significant. Nevertheless, try to ensure that your credit report lists as much positive activity as possible.
Most FHA lenders require a credit score of at least 620. More commonly, though, a score of 640 is required. Scores in this range won't get you the best mortgage rates, but the FHA insurance allows lenders to offer loans to these borrowers. If an applicant's credit score is below 600, many lenders may still offer loans as long as no late payments have occurred in the past twelve months.
If an applicant has no credit score whatsoever, lenders typically won't offer him or her a loan. In some cases, however, lenders will agree to work with such applicants if financial responsibility can be established in some other way. Rent payments or utility payments, as well as phone or internet payments, may allow some applicants to prove responsibility in the form of non-traditional credit. Again, however, every lender has a different policy regarding applicants with extremely low credit scores or no scores at all.
The best way to qualify for an FHA mortgage is to build up your credit until it's at least 640. Make sure you're current on all payments and that no collections or charge-offs have been added to your report within the past twelve months. This will help you get the best FHA mortgage package available.
