Like a lot of questions regarding mortgages, the answer to that question is: it depends on a lot of other things.

As of the date of this post, the FHA has set the minimum credit score that is acceptable at 580. Unfortunately, that does not mean that all borrowers with a 580 FICO score will qualify for an FHA-insured loan. Some may be approved for an FHA loan, others may not. Why? Lenders look at a lot more than credit scores. They also look at things like income, assets, monthly expenses, debts and more.

When a borrower applies for a loan, the lender calculates the ratio of the borrower’s monthly housing expenses and debt to monthly income, and they reviews assets to determine how much cash is in reserve that could be used to make monthly of mortgage payments. In addition, the amount of the down payment a borrower can make is also a factor.

In a hypothetical scenario, if a borrower has a history of steady income, can make a good-sized down payment and has very little credit card or other debt, but has a low credit score, that borrower might still qualify for an FHA loan.

When it comes to credit scores and other factors, a lot also depends on the specific lender.  Some lenders apply what are called “credit overlays” to the loans they make.  Basically, this means that the lender is using stricter guidelines than the FHA requires.  All lenders are allowed to do this, provided they are not breaking any state or federal rules and regulations, especially those regarding fair lending.

Another thing to keep in mind is that because a lender is taking a bigger risk on a borrower with a lower FICO score, the lender can charge a higher rate for the loan.

All of this isn’t intended to discourage people who may have a lower credit score.  Instead, it underscores the importance of working with a lender and mortgage loan originator that will sit down with you and carefully review all of your options. If want to know more about your options, contact a HomeBridge Loan Officer and ask about credit scores and other criteria necessary when qualifying for a home loan. You may have more choices than you think!

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