While FHA loans have more flexible guidelines than most other loans, there are still several factors that shape whether you qualify or not. The single most important factor is your credit score. While you can technically qualify on a score as low as 500, doing so requires a steep 10 percent down payment. A credit score of 580 or better lets you cut the required up-front payment down to a more manageable 3.5 percent. FHA will also look at your debt-to-income ratio and the value of your home.
- Some of the most flexible underwriting guidelines in the market are provided by the FHA but that doesn’t mean they reject a lot of people.
- If one has a low credit score he could go as low as 500 and that would require making a 10 percent down payment.
- After the credit score, the second most important fact that lenders check for is one’s debt-to-income ratio because that shows whether one can afford the mortgage.
“We’ll start with your credit score, as that’s the most important factor in most loans. The FHA has some of the most flexible credit score guidelines, though. They require at least a 580 credit score in order to get 97.5% financing.”