What Is the Minimum Credit Score for an FHA Loan?

If you're a first-time home buyer in the U.S., you've probably heard that FHA loans are one of the easiest ways to get into a house. But here’s the real question: What is the minimum credit score for an FHA loan? It’s not as simple as a single number, and getting the wrong info could cost you thousands or delay your purchase by months.

FHA Loans Are Built for People With Lower Credit

FHA loans are backed by the Federal Housing Administration, a government agency created in 1934 to help regular people buy homes when banks wouldn’t. Unlike conventional loans that often demand credit scores of 700 or higher, FHA loans are designed for borrowers with less-than-perfect credit. That’s why over 80% of first-time buyers who use FHA loans have credit scores below 680.

The lowest credit score you can have and still qualify for an FHA loan is 500. But here’s the catch: if your score is between 500 and 579, you’ll need to put down at least 10% of the home’s price. That’s a big jump from the standard 3.5% down payment most people expect.

What Credit Score Do You Actually Need to Get the Best Terms?

Most lenders don’t stop at the FHA’s minimums. Even though the government says 500 is acceptable, private lenders set their own rules - and they’re stricter. Over 90% of lenders require a minimum score of 580 just to approve the loan. Why? Because they’re worried about defaults. A borrower with a 550 score is statistically more likely to miss payments than someone with a 650.

If your score is 580 or higher, you can get the full 3.5% down payment benefit. That means for a $300,000 home, you’d only need $10,500 upfront instead of $30,000. That difference can make or break your ability to buy. In 2025, the average first-time buyer in the U.S. put down $15,600. With a 580+ score, you’re already ahead of the curve.

How Lenders Really Judge Your Credit

It’s not just your FICO score that matters. Lenders look at your whole credit story. They check:

• How many late payments you’ve had in the last 12 months
• Whether you’ve had a foreclosure, bankruptcy, or short sale in the past few years
• Your debt-to-income ratio (how much you owe versus how much you earn)
• How long you’ve had credit accounts open

For example, if you have a 590 score but paid every bill on time for the last 18 months, you’re in better shape than someone with a 620 score who missed two payments last year. Lenders care more about recent behavior than your all-time low.

One common mistake first-time buyers make is applying for new credit right before they apply for a mortgage. Opening a new credit card or taking out a car loan can drop your score by 10 to 30 points. That’s enough to push you from 585 down to 560 - and suddenly, you need 10% down instead of 3.5%.

What If Your Score Is Below 580?

You still have options. First, don’t panic. Many people boost their scores by 50 to 100 points in just 3 to 6 months with simple steps:

1. Pay all bills on time - no exceptions
2. Reduce credit card balances to under 30% of your limit
3. Dispute errors on your credit report (about 20% of reports have mistakes)
4. Ask creditors to increase your credit limits (without increasing spending)
5. Don’t close old credit accounts - length of credit history matters

One buyer in Atlanta raised her score from 542 to 618 in five months by just paying down $3,000 in credit card debt and disputing two incorrect late payments. She went from needing $20,000 down to $5,000. That’s a $15,000 difference.

Other FHA Loan Requirements You Can’t Ignore

Your credit score isn’t the only thing that matters. FHA loans also require:

• A steady income history - usually two years of W-2s or tax returns
• Proof of U.S. citizenship or eligible non-citizen status
• A home that passes FHA appraisal standards (no major safety issues)
• Mandatory mortgage insurance (both upfront and monthly)

Mortgage insurance is a big cost. For a $300,000 loan with a 3.5% down payment, you’ll pay $1,050 upfront plus about $150 to $200 a month in insurance. That’s $1,800 to $2,400 extra per year. You can’t avoid it unless you refinance later or put down 10% or more.

How FHA Loans Compare to Other Options

Let’s say you’re a first-time buyer with a 600 credit score. Here’s how your options stack up:

If you’re eligible for VA or USDA loans, those can be better - no mortgage insurance, lower payments. But FHA wins for most first-timers because it’s widely available, even in cities with high prices.

What Happens If You Get Denied?

Many people think a denial means they’re stuck. It doesn’t. Most FHA denials happen because of:

• High debt-to-income ratio (over 43%)
• Recent bankruptcies or foreclosures
• Not enough documented income
• Errors on credit reports

If you’re denied, ask for a copy of the adverse action letter. It will tell you exactly why. Then, fix it. If your issue is credit, work on it for 4 to 6 months. If it’s income, get a co-signer or wait until you’ve had a steady job longer. There’s no rush. Waiting six months to get your score up could save you $10,000 in down payment.

Bottom Line: What Score Do You Really Need?

The official minimum is 500. The practical minimum is 580. If you’re under 580, don’t give up - fix your credit. If you’re over 580, you’re in the sweet spot. Focus on saving for your down payment, reducing debt, and avoiding new credit applications. Most first-time buyers who succeed with FHA loans don’t have perfect credit. They just have a plan.