If you’re applying for an FHA Loan, one of the criteria’s which affect your loan approval status is your credit score. This rating can change drastically based on credit utilization, recent credit activity, and other factors. If you don’t know your current score, you can keep track of your credit score and see ways to improve it free through services like Credit Karma.
FHA loan rules state that credit scores of 580 or higher are required for “maximum financing”, which is the cost of the loan minus the required 3.5% down payment. If you have a credit score lower than 580, but not lower than 500 you may still qualify for an FHA loan but will likely have a higher down payment (10% vs 3.5%).
You may be able to find lenders who offer loans to those with credit scores lower than this requirement, but in those cases, it’s important to remember that you’ll likely need to address credit issues with the lender in order to increase your score high enough to meet the FHA loan requirement.
Increasing your Credit Score for an FHA Loan
Credit scores below 580 typically will require substantial time to increase your score to a level appropriate for an FHA Loan. If your score is above 580, you can likely increase your score within a few months to upwards of 700. By increasing your score, you will typically receive a more favorable interest rate and not have to put as much down for your downpayment.
In order to keep a healthy credit score, avoid applying for new credit card (unless recommended by your lender) or buying a new car. Make sure to also lower balances on your credit cards and pay all your bills on time in the 12 months leading up to applying for an fha loan.
Working closely with a local FHA loan officer and Real Estate Agent are the best ways to prepare yourself for buying a home. When you’re ready to get started, call our FHA Condo support team at (833) 356-1060 to get connected with our preferred network of FHA Lenders, Agents and Appraisers.