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FHA Credit Score Guidelines 2021

FICO Scores

There are different FICO scoring models for each vertical: credit card, auto, mortgage, luxury items, and high-ticket items. They all use different algorithms to calculate the score for a borrower. It is imperative that a borrower monitors and know their “mortgage” FICO score and not their credit card FICO score before applying for a home loan.


The “mortgage specific” FICO scoring models are:

Equifax = FICO score 5
Experian = FICO score 2
TransUnion = FICO score 4

If you are seeing a FICO score model different from what is stated above, rest assured that it is NOT the mortgage FICO score that lenders use to qualify a borrower.


Knowing Your Middle FICO Score

After you find out your mortgage-specific FICO scores based on what was mentioned above, it is time to know where you stand. The three (3) different credit bureaus will give you 3 different scores. You must discard both the highest and lowest scores, respectively. What you are left with is your “middle FICO score“. That is the score that mortgage lenders use to qualify for a loan.

For example, if your Experian score is 600, Equifax is 620, and TransUnion is 640 after you discard both the highest score (640) and the lowest score (600), you are left with 620 — that is your “middle FICO” score.

FHA FICO Score Requirement

Although the Federal Housing Administration (FHA) only requires a 580 FICO score to qualify for the 3.5% minimum down payment requirement, borrowers are hard pressed to find a direct lender or an approved FHA Lender to extend a mortgage loan with such a low FICO score.   We are one of the few FHA lenders in Texas that will extend a mortgage to borrowers with a FICO score of 580; most Texas lenders will require at least a middle score of 620 to qualify, if not higher.

 FHA Down Payment

There are two minimum credit scores requirements for an FHA loan, depending on the down payment level.

  • To qualify for the minimum down payment requirement of 3.5%, a borrower must have a minimum middle-FICO score of 580.
  • Borrowers with a FICO score of less than 580 and all the way down to 500 may still qualify for an FHA-insured loan but they will need a minimum of 10% down payment.

Most commercial lenders and big banks use 640 middle FICO score as the credit score criteria to qualify a home buyer. Logic is simple, the higher the credit rating, the less the likelihood of defaulting on their mortgage loan. TexasFHA.org will extend an FHA mortgage to borrowers with scores as low as 580 with compensating factors. 

As long as the borrower gets approval from either Fannie Mae or Freddie Mac’s automated underwriting system (AUS), and they meet all the criteria and requirements, they can get an FHA loan. After all, we are the TexasFHA.org, the best FHA lender in Texas.

Non-medical collections and charged-off accounts do not have to be paid either. While most lenders require these items to be paid, our investors at TexasFHA.org will not require previous collection accounts to be paid off prior to closing on your loan.

Minimum credit score for FHA loan

fha and credit

As mentioned above, there are two minimum credit score requirements for an FHA: (a) 580 with 3.5 percent down and (b) 500 with 10 percent down. However, an FHA loan is not a sub-prime loan program. Although the FHA allows borrowers with a lower FICO to qualify for a home loan, it does not allow approvals to borrowers who have low scores due to their inability to manage and pay their creditors on time. There are several reasons why a borrower’s credit score is low without actually having a “bad credit”.

  • Credit Utilization

    – Credit utilization is the ratio of your credit card balances in relation to your credit limits. It is the measurement of the amount of the credit limit that is being used.

  • Recently Opened Accounts

  • – Recently opened accounts, especially too many recently opened accounts, can hurt your overall credit score. Since the accounts were just opened recently, the history on those new accounts is not long enough to provide sufficient payment history to demonstrate a responsible behavior. Furthermore, having multiple open accounts that are relatively new is seen as a higher risk due to the possibility of becoming overextended, resulting in loan default.
  • Limited Credit History

  • – Limited credit history means that your credit file either has a few accounts listed, less than 5 accounts with no major account or the open accounts have only been opened for a short period of time, typically within 12 – 24 months history. In short, it means your credit profile is new. It is not a bad thing, it just means they are all recently opened, having not enough history, therefore will not get a high credit rating.
  • Previous Derogatory Accounts

  • – Derogatory account means that account is considered negative. Typically, a negative account indicates serious delinquency or late payments. If you have a derogatory item in your credit report, it can have a significant negative impact your credit score.

For more information regarding credit score requirements, contact us at 800-854-4142 or use any of the tools on this website.

FHA Loan Benefits and Advantages

Compared to conventional loans, FHA carries a lower interest rate. Since HUD insures the loan against future default, it is offered a lower rate.

Minimum requirement for an FHA loan is only 3.5% compared to 5% on conventional loans. The borrower can also get a “gift” from family members to be used as a down payment on the house.

Required minimum credit score for an FHA loan is lower compared to the conventional counterpart. TexasFHA.org will extend an FHA loan to borrowers with middle FICO scores as low as 580. 

FHA loans can go as high as 57% debt-to-income (DTI) ratio with an automated underwriting system approval. Conventional loans can only go as high as 45% DTI. What does this mean? This allows the home buyer to purchase a higher sales price home. Lots of times, the higher DTI decides if a borrower qualifies for a home loan or not. 

An FHA Loan Specialist Available to Help You

Our FHA Loan Specialists are always available to help you and answer any questions.  You may contact a dedicated FHA Loan Specialist through our website or by calling us directly. You may also chat with us to get a quick answer to your questions.

We make the FHA Loan Process Quick & Easy

Lenders often times will steer their clients away from an FHA loan due to their inexperience with the program.  FHA Loans are a great source of funding for our clients.  We share our knowledge and experience with FHA loans, making it easier for borrowers.

FHA Approved Lender

The Federal Housing Administration requires lenders offering FHA loans to go through an extensive approval process. We are FHA-approved and designated as a “Full Eagle” FHA mortgage lender offering FHA-insured home loans in Texas.

FHA Loans Help Make Home Ownership Possible For a Wider Range of People.

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6131 Orangethorpe Avenue, Ste 500
Buena Park, CA 90620



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