FHA Loans and Bad Credit Scores

Low credit scores and past financial problems are two reasons that FHA has been so popular with American consumers looking to reestablish their credit with a competitive mortgage. Buying a home is a serious investment, and one that can have a tremendous effect on the rest of your life – personally as well as financially. For those with less than perfect credit, however, finding a home loan isn’t always as easy as it is for others. Luckily, there are some government programs designed to help make it possible for home buyers with poor credit to secure a home loan and get into the home of their dreams. The U.S. government has been supportive of getting Congress to approve new FHA loans for people with bad credit and gaps in their employment.


One perfect example of these government programs is the FHA home loan. This government program was introduced in the 1930s and today it continues to help those with low credit scores secure a home loan.

The government itself doesn’t offer the loans – it only insures the loans. This allows lenders working with the FHA to offer better deals to those with poor credit. The Federal Housing Administration has been helping Americans secure financing for residential real estate since 1934.

How to Find a FHA Home Loan with Less than Perfect Credit

If you want to find the best poor credit FHA home loans, you need to devote a little bit of time to the process. Here are some steps to remember.

  • Be Realistic – First and foremost, be realistic about your possibilities. FHA credit score limits are low – the minimum is often 500 – but if you have terrible credit, you might not be able to secure a loan. Also, be sure to understand that even with an FHA loan, your credit score will impact your interest rate. You’re not going to get the lowest possible rate with a poor credit score, no matter what program you use.
  • Shop Around – It’s incredibly important to remember that not all FHA lenders offer the same loans. If you have a low credit score, you need to spend time making sure that you find lenders who will offer you a loan instead of turning you down. While the FHA itself has a minimum credit score of 500, different lenders may set their own requirements – some could have a limit of as much as 660. In other words, you need to look for FHA lenders that have low minimum credit scores. Scores between 500 and 580 are ideal, especially when you have less than perfect credit.
  • Get A Down Payment – Generally speaking, the larger your down payment is the easier it will be to secure a home loan. In fact, large down payments can even help overcome credit score problems in some instances. While you only need 3.5% down for most FHA loans, having more could help you secure a better rate and ensure that you get the loan you need. And since FHA allows for gift funds, even your parents and friends are allowed to help you get the down payment money that you need. Not all loans allow for this, so be sure to pay attention to the amount of a down payment you can raise.

With the right lender, it’s far more possible to secure a home loan than you might have thought. Thanks to poor credit FHA home loans, you could get the loan you need to buy your home. Just keep the three key steps listed above in mind and it will be much easier to do so.

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