You must have a credit score of at least 500 for an FHA loan, but to qualify for the lowest down payment, you’ll need 580 or higher.

FHA loans can be the long-sought answer for first-time homebuyers with lower credit scores and low down payments. The question remains, though: Do you have a FICO credit score that would qualify you for an FHA loan? Here’s what you need to know.

Lowest allowable credit score: 500

You’ve got to bat at least 500 to get into this game. With a FICO score below 500, you won’t qualify for a Federal Housing Administration loan. And even with that, you won’t get the full low-down-payment benefit that FHA borrowers with higher scores will.

Better credit score = lower down payment

If your credit score is just a little bit higher, you get a major break on the down payment.

“To qualify for FHA’s minimum down payment of 3.5%, a borrower must have a credit score of 580 or above,” says Brian Sullivan, a public affairs specialist for the Department of Housing and Urban Development.

“Between 500 and 579, the borrower must put 10% down,” Sullivan says.

It’s not just about your credit score

“FHA’s standard underwriting criteria is rolled up into a ‘scorecard’ that considers many factors related to income and debt,” Sullivan adds. “Under certain conditions, particularly when a borrower doesn’t fit into our general scorecard requirements, manual underwriting is required.”

That means a lender has to pull your file out of its automated loan process and review it by hand, and lenders aren’t always eager to do that.

Required scores can vary by lender

The credit score thing may seem pretty cut and dried, but hang on. The fact is: “Lenders set the interest rate, not FHA,” Sullivan cautions.

“FHA is a government mortgage insurance company,” Sullivan explains. The FHA can set its standards and commit to insure mortgages that meet those requirements, “and yet, lenders may add on what are called ‘credit overlays’ on top of our standards,” he adds.

So lenders may require a higher credit score to make a loan or stack on additional credit qualifications. To make sure you get the best interest rate and loan terms, shop more than one FHA-approved lender and compare.

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