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If you want to buy a home but don’t have money for a large down payment, then a loan backed by the Federal Housing Administration (FHA) may be a great option.

FHA loans are widely popular due to their flexible requirements, including low down payment and credit score thresholds. Instead of having to come up with a large down payment, borrowers have to pay for the loan insurance – which is done as part of the monthly mortgage payment instead as an up-front lump sum.

FHA loans are not issued by the FHA, but are issued by traditional lenders and guaranteed by the agency. The required FHA loan insurance protects the lender from a loss arising from default. As a result, lenders can offer attractive interest rates to borrowers.

Credit Score Requirement

There are a couple of minimum credit score thresholds for FHA loans.

To qualify for the minimum down payment amount (3.5 percent), an applicant must have a credit score of 580 or higher. If they have a credit score ranging from 500 to 579 then they will qualify for the FHA loan, however, they will have to pay a higher down payment of 10 percent.

Home buyers with a credit score under 500 are unlikely to qualify for these loans.

FHA Loan Eligibility

If you’re thinking of applying for an FHA Loan, you must meet the following eligibility requirements:

  • Credit score: You will need a minimum credit score of 500 to qualify for an FHA loan. To qualify for the minimum down payment amount, you will need a score of 580.


  • Property: You must be purchasing a home in good repair. The property is collateral for the lender and therefore must meet specific quality standards.


  • Debt-to-Income ratio: Borrowers are required to have a debt-to-income ratio of 43 percent or less.


  • Down payment: Applicants must be able to pay the minimum down payment amount of 3.5 percent of the home’s value (10 percent if they have a lower credit score).


  • Documentation: Borrowers must submit all necessary documents to their lender including bank statements, proof of income, and tax returns.


FHA Loans are ideal for hopeful homeowners with low to moderate income levels who can’t qualify for conventional home loans. If you’re wondering whether an FHA loan might be right for you, mortgage banking/brokerage firm TILA Mortgage can help. Their licensed loan officers are dedicated to assisting clients to qualify for and close FHA Loans as quickly as possible.

In addition to FHA loans, TILA Mortgage offers an extensive selection of mortgage products including fixed-rate loans, adjustable-rate loans, jumbo loans, USDA loans, VA loans, and more. Contact TILA Mortgage now to find a home loan that fits your needs and helps you achieve your dream of homeownership.

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