A mortgage the Federal Housing Administration backs is known as an FHA loan. FHA loans are unique from other mortgages and home loans. They’re often helpful for first-time homeowners because they offer a combination of a lower down payment requirement and lower credit score standards.
The following are some of the critical factors when it comes to qualifying for an FHA loan.
Credit Score Requirements
The minimum credit score for an FHA loan approval is 500. That’s lower and often significantly lower than lender requirements for traditional mortgages. The lower credit score requirements are a big reason this is an appealing program for first-time buyers.
While the FHA has guidelines for credit score minimums, that doesn’t automatically mean a lender won’t have higher requirements. FHA loans aren’t from the government directly.
Instead, they’re insured by the FHA on behalf of the lender.
Even though lenders’ risk is minimized because they have that backup, they may reduce their risk by having higher credit minimums. Just as you would with any other type of mortgage, it’s still important to shop around and compare FHA lenders to make sure you’re getting the best terms.
To learn more about FHA Home Loan and the home buying process, visit the SCOOP! Blog
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