HUD Articles

It’s a brand-new year, so we thought it was time to take a fresh look at some of the more important FHA loan requirements. Today, we will cover the credit score needed for FHA loan approval in 2018.

Some of the information that follows is based on the official HUD handbook for this mortgage program, and some of it is derived from our on ongoing conversations with FHA-approved lenders.

Key points from this article:

• In 2018, the minimum credit score needed for FHA loan eligibility is 500.
• In order to take advantage of the 3.5% down payment option, borrowers need a credit score of 580 or higher.
• But lenders can set their own requirements on top of those established by HUD.
• Most of the mortgage lenders we have spoken to require a credit score of 600 or higher for FHA loan approval.
• These lender requirements or “overlays” are not set in stone; they can vary from one company to the next.

Official HUD Guidelines for Credit Scores

Let’s start with the official credit score needed for FHA loan eligibility in 2018.

The official guidelines for the Federal Housing Administration mortgage insurance program are found in HUD Handbook 4000.1, also known as the Single-Family Housing Policy Handbook. Within this document, we find the minimum credit score needed for FHA loan eligibility. Here’s what it says:

Lender Overlays Are Possible

As mentioned earlier, mortgage lenders can establish their own guidelines above the minimum requirements set forth by HUD. In industry jargon, this is known as an “overlay.”

Some mortgage lenders don’t impose overlays for FHA loans, while others do. Because of this, the minimum credit score needed for actual FHA loan approval can vary from one lender to the next. So they are not set in stone.

With that being said, many of the mortgage companies we have spoken to when preparing this article said that they set the bar somewhere between 580 and 620.

It’s also important to keep in mind that the credit score is just one of the things needed for FHA loan approval in 2018. Borrowers must also have a manageable level of debt in relation to their income, along with a minimum down payment of 3.5%.

Those are the most important requirements for FHA loan approval – decent credit, manageable debt, sufficient income to repay the loan, and an upfront down payment equaling 3.5% of the purchase price or appraised value.

The takeaway: A credit score of 500 or higher will meet HUD’s minimum requirement for FHA loans, and you might actually get approved in that range. But having a score of 600 or higher will put you in the more desirable range, increasing your chances for approval.

The disclaimer: This article addresses the question, What is the minimum credit score needed for FHA loan approval in 2018? This article does not constitute official policies or guidelines. We are not affiliated with HUD in any way. This information has been presented to give borrowers a general idea of what score is needed to qualify for an FHA loan. The only way to find out for sure if you are qualified for this program is to speak with a HUD-approved mortgage lender.   http://www.fhahandbook.com/blog/credit-score-needed-for-fha/