Any banking institution in the country will have strict mandates for how high a borrower’s credit score should be. It must be a certain number. It must cover a certain period of time. These restrictions strangle any potential for a borrower with a spotty history to come in and build their assets.
There are some standards for obtaining an FHA loan, but they are substantially less strict. What are the requirements for obtaining an FHA loan? Furthermore, are these “requirements” required at all?
The Basic Credit Score Number: Not a Line in the Sand
For all intents and purposes, 580 is the minimum credit score necessary to apply for the lowest down payment amount of 3.5%. Anyone with a score less than 580 can receive 3.5%, but it does not necessarily mean they will. Other factors (i.e. years of credit history, current credit load) will come into effect. The 580 number is not a line in the sand for who can and who cannot receive a texas fha mortgage.
Below 580: What to Expect
Credit scores below 580 can still be considered for a loan. The typical down payment range here is 10% to 30% which, again, involves the other relevant factors. At this point, it may be advisable to improve the credit score as opposed to pushing forward with the high down payment. For example, the 10% down payment could be made to open up a credit card and get it paid off. It could be used to consolidate debt or pay off existing debt.
It is possible to knock it right out of the park with fantastically low down payments in the range of 3.5% to 5%, as well as notoriously low-interest rates. Two lines of open credit are usually needed for an FHA loan. Like everything else, it is not a strict requirement. It is merely a suggestion to maximize the chances of receiving approval.
Ultimately, no one is automatically denied an FHA loan based on one specific data point. The credit requirements are no more than strong suggestions. They dictate the course of the loan with texas mortgage lenders, but they do not invalidate or automatically confirm the status.