FHA Loan Credit Requirements

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Low credit score requirements gained the FHA its popularity. No other loan program offers such low credit score and flexible underwriting requirements. While you need decent credit, you don’t need great credit to secure an FHA loan in Colorado. Let’s check it out in detail below.

FHA Loan Credit Score and Down Payment Requirements

The FHA determines your down payment requirement on your credit score. Here’s how it works:

• If you have at least a 580 credit score, the FHA requires a 3.5 percent down payment. If you have a credit score of 619 or higher, 100 percent of the down payment may be gift funds, otherwise you must contribute the entire down payment.
• If you have a credit score between 500 – 570, the FHA requires a 10 percent down payment. 3.5 percent of the funds must be yours, and the remaining 7.5 percent may be gift funds.

As with any loan, the higher your credit score, the better the terms, but knowing you have an option with a 580 credit score or sometimes lower, is helpful.

FHA Loans with no Credit

Some borrowers don’t have credit, and it’s not their fault. If you haven’t opened a credit card or taken out a loan yet, or it hasn’t been long enough, you don’t have a credit score. If this sounds like you, we can use alternative credit to qualify you for the loan.

Think about the bills you pay regularly. If you pay any of the following regularly (and on time) we can use it to qualify you for an FHA loan:

• Rent
• Utilities
• Insurance
• Tuition

Gather proof of the last 12 months of these payments. It’s best if you have at least three accounts to prove your creditworthiness. If your other qualifying factors meet the FHA guidelines, your alternative credit may get you the approval.

Working with Underwriters

The FHA automated most of its loan process. They use a software system to approve borrowers. What happens if you don’t meet the computer’s guidelines yet would be a good risk? Some lenders I work with offer manual underwriting.

All this means is a human underwriter looks at your loan rather than a computer. If you have unique circumstances that a computer doesn’t understand but a human underwriter can look at it and see that you are a good risk, we’ll use lenders that offer manual underwriting.

I have worked with FHA borrowers for many years. I’ve seen many circumstances and know which lenders accept each circumstance. Let’s talk about your credit history or lack thereof and see how I can help you secure the FHA loan you need based on the FHA loan credit score requirements in Colorado.

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