FHA loan: 500 credit score
You can qualify for an FHA loan with a low credit score of 500 and a 10% down payment, or 3.5% down if your FICO is 580 or above. FHA loans accept applicants with credit scores as low as 500. Applicants with scores between 500 and 579 need a 10% down payment.
Credit score and mortgages
If lenders review all the information and determine that you are likely to make your mortgage payments in full and on time, you may be able to get better loan terms. The minimum credit score needed for most mortgages is typically around 620.
In general, lenders don't want you to spend more than 43 percent of your income on a mortgage and any other debt payments, like student loans. With some first-time buyer programs, there are also income limits. These typically vary based on location and are often capped at 80 percent of the area's median income (AMI).
Yes, you can! While a lower score may limit your options, it doesn't mean homeownership is off the table. Lenders may offer loans for a 600 credit score, such as FHA, VA, or USDA loans that cater specifically to borrowers with less-than-perfect credit.
You can buy a $300,000 house with only $9,000 down when using a conventional mortgage, which is the lowest down payment permitted, unless you qualify for a zero-down-payment VA or USDA loan. Different lenders have different rules, but typically they require a 620 credit score for conventional loan approval.
GUS analyzes your risk and eligibility as a borrower using a scorecard. Automatic GUS approval requires you to have a credit score of 640 or higher with no outstanding federal judgments or significant delinquencies. Even if you don't have a 640 credit score, it's still possible to apply and be approved for a USDA loan.
You may be denied for an FHA loan if you have declared bankruptcy but you have not had the bankruptcy discharged. You may be denied if you are delinquent on federal taxes or otherwise owe money to the federal government but without an approved payment plan.
Common First-Time Home Buyer Mistakes To Avoid
From not saving enough money to not paying enough attention to your credit, to simply waiting too long to make an offer, home buying mistakes can slow you down.
FHA loans. The Federal Housing Administration (FHA) insures FHA loans, which allows mortgage lenders to accept a credit score as low as 580 with a 3.5 percent down payment, or 500 with a 10 percent down payment.
To afford a $400,000 house, you typically need an annual income between $100,000 to $125,000, which translates to a gross monthly income of approximately $8,333 to $10,417. However, this is a general range, and your specific circumstances will determine the exact income required.
An FHA loan will typically be the easiest mortgage to qualify for because it offers the lowest credit score requirement — far lower than for a conventional loan — and requires only a 3.5% down payment.
FHA Loan: Cons
Here are some FHA home loan disadvantages: An extra cost – an upfront mortgage insurance premium (MIP) of 2.25% of the loan's value. The MIP must either be paid in cash when you get the loan or rolled into the life of the loan. Home price qualifying maximums are set by FHA.
For instance, the minimum required down payment for an FHA loan is only 3.5% of the purchase price.
To know for sure, you should understand that a first-time homebuyer is defined as someone who has not owned and occupied their home in the last three years, and who has not lived in a home owned by a spouse in the past three years.
Average age of first-time homebuyers is 38, an all-time high. Here's what that says about the real estate market. In 2024, the median first-time homebuyer was 38 years old, according to the National Association of Realtors' 2024 Profile of Home Buyers and Sellers report.
The three primary factors that can disqualify you from getting an FHA loan are a high debt-to-income ratio, poor credit, or lack of funds to cover the required down payment, monthly mortgage payments or closing costs.
Must have an undamaged exterior, foundation and roof. Must have safe and reasonable property access. Must not contain loose wiring and exposed electrical systems. Must have all relevant utilities, including gas, electricity, water and sewage functioning properly.
You can use Neighbors Bank's Property Eligibility Map to check if an address meets qualifications. Credit History and Score: While USDA loans have more lenient credit requirements compared to conventional loans, a very low credit score or a history of bankruptcy, foreclosures or short sales can lead to denial.
FHA minimum credit score
If you put just 3.5 percent down, the minimum credit score for an FHA loan is 580. You can qualify with a score as low as 500, but you'll need to make at least a 10 percent down payment.
With FICO, fair or good credit scores fall within the ranges of 580 to 739, and with VantageScore, fair or good ranges between 601 to 780. Many personal loan lenders offer amounts starting around $3,000 to $5,000, but with Upgrade, you can apply for as little as $1,000 (and as much as $50,000).