{"id":996,"date":"2017-08-21T15:07:58","date_gmt":"2017-08-21T15:07:58","guid":{"rendered":"http:\/\/www.fhahandbook.com\/blog\/?p=996"},"modified":"2024-04-06T16:39:30","modified_gmt":"2024-04-06T16:39:30","slug":"lowest-and-average-credit-score","status":"publish","type":"post","link":"http:\/\/www.fhahandbook.com\/blog\/lowest-and-average-credit-score\/","title":{"rendered":"What’s the Lowest and the Average Credit Score for an FHA Loan?"},"content":{"rendered":"\n

This is part of our ongoing blog series that answers frequently asked FAQ questions<\/a>. Today’s question is: What is the absolute lowest credit score allowed for an FHA loan in 2017? And what’s the average score for borrowers who use the program?<\/p>\n\n\n\n

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Short answer:<\/strong> According to guidelines from the Department of Housing and Urban Development, the lowes<\/em>t credit score you can have for an FHA-insured mortgage loan is 500. However, in order to qualify for the 3.5% down payment option, borrowers must have a minimum score of 580. (Borrowers that fall within the 500 – 579 range must make a down payment of at least 10%.) The average<\/em> FICO credit score, as of July 2017, was 646 for refinance loans and 683 for purchase loans.<\/p>\n<\/div>\n\n\n\n

The Lowest Credit Score for an FHA Loan Is 500<\/h2>\n\n\n\n

When it comes to the lowest FHA credit score, there are two things you need to know above all else:<\/p>\n\n\n\n

1. Ultimately, it’s up to the lender.<\/strong><\/p>\n\n\n\n

Mortgage lenders have the final say as to what credit score they will accept for an FHA borrower. The Federal Housing Administration does not lend money directly to borrowers \u2013 they simply ensure lenders against losses that might result from borrower default. The money comes from a lender, just like any other type of mortgage loan.<\/p>\n\n\n\n

So while HUD does<\/em> have specific guidelines regarding the lowest credit score for FHA loans, the final decision regarding loan approval will come from the mortgage lender. They can impose their own guidelines on top of those issued by HUD.<\/p>\n\n\n\n

2. There are two “minimum” scores for this program.<\/strong><\/p>\n\n\n\n

There is actually a two-tiered system regarding the lowest credit score for an FHA loan. The absolute minimum score for program eligibility is 500. This is clearly stated in the Single-Family Housing Policy Handbook, also known as HUD Handbook 4000.1.<\/p>\n\n\n\n

However, there is a secondary requirement as well. Borrowers need a credit score of 580 or higher to qualify for the 3.5% down payment option.<\/p>\n\n\n\n

This two-tiered system causes confusion among some borrowers. When you use the phrase “lowest credit score for an FHA loan”, it can actually mean two things. The lowest number to qualify<\/em> for the program is 500. But the whole reason people use this program in the first place is to qualify for the 3.5% down payment option, and borrowers need a score of at least 580 to use that option.<\/p>\n\n\n\n

The Average FICO Score Among Borrowers<\/h2>\n\n\n\n

The previous section explains the absolute lowest credit requirements for the Federal Housing Administration’s mortgage insurance program. As for the average<\/em> FHA credit score among borrowers who use this program, those numbers are usually a bit higher.<\/p>\n\n\n\n

Ellie Mae is a company that provides mortgage origination and processing software to the lending industry. They also publish a monthly Origination Insight Report<\/em> that “mines its application data from a robust sampling of approximately 80 percent of all mortgage applications that were initiated” through their software solutions.<\/p>\n\n\n\n

Among other things, this report shows the average FICO credit score for closed FHA loans. These are loans that successfully reached the finish line.<\/p>\n\n\n\n

Here’s a look at the latest averages from their July 2017 report.<\/p>\n\n\n\n