Credit Score Needed for FHA Home Loan Program

Reader Question: What credit score do I need to get an FHA first-time home buyer loan?

First, let me clear something up. There is an FHA home loan program designed to make home buying more affordable, but it is not limited to first-time buyers. Anyone can apply for such a loan. With that being said, it can be a useful program for first-time buyers because it can help you get a mortgage loan when you might not otherwise qualify for one.

One of the biggest benefits of FHA loans is that you can often get approved with less money down. For tradition loans, most lenders these days require somewhere in the neighborhood of 20 percent down (especially in light of our current economic issues). But you can theoretically get approved for an FHA home loan with as little as 3^1/2 percent down.

I would love to give you a credit score limit that you need to get qualified for the FHA home loan program, but it's just not possible. Here's why. The FHA does not set the eligibility criteria for these loans, because they are not the one making the actual loan. You still have to apply through a private mortgage lender. So the minimum acceptable credit score will vary, based on which lender you approach.

Because of the FHA's backing, lenders have traditionally been willing to offer loans to buyers will less-than-ideal qualifications (such as a low credit score). You would apply for an FHA loan through a regular lender, and -- theoretically -- you would be able to get approved with less of a down payment, a lower credit score, etc. I used the word "traditionally" above because times have changed. In our current economy, I'm not sure how much difference the FHA backing will make, in terms of getting approved through a private lender.

Find Out if You're Eligible for an FHA Loan

The only way to find out if you're eligible for the FHA home loan program (based on your credit score and other criteria) is to apply for it. There are couple ways to go about this -- and one is much easier than the other...

• The FHA has a list of approved lenders that you can access through this page. I don't know about you, but I personally would not want to contact a long list of lenders to see if I'm eligible for the FHA program.
• An easier way to apply would be through a website like LendingTree. In fact, we have an in-depth explanation of the FHA loan program on our main website, and it has links to the appropriate LendingTree application page. Go there now

I know I didn't answer your credit score question, because there's no way for me to answer it. But I hope you have a better understanding of how it all works now. Good luck.

Related Question:
Will FHA loans be available in 2009?