Minimum FICO Score For An FHA (Federal Housing Admin) Loan?

You need a 580 FICO score only if you want the FHA loan's low 3.5 % down option; a score of 500 works when you can put at least 10 % down. Anything lower, or a higher score requirement, usually comes from a lender overlay, not the FHA itself.

• 580 + → 3.5 % down, standard FHA qualification
• 500‑579 + → 10 % down, still meets FHA's official minimum
• Lender overlays can raise the bar to 620 or higher regardless of down payment (see 'how lenders add overlays and raise your minimum')
• Compensating factors (strong cash reserves, low debt‑to‑income) may help you qualify even if a lender's overlay exceeds the FHA floor

Lenders add overlays by simply requiring a higher FICO score than the FHA's official minimums - 500 with 10 % down or 580 with a 3.5 % down payment - so a borrower who meets the government floor can still be turned down if a bank's rule says 620 or 640 is needed for its FHA loan programs.

These higher cut‑offs protect the lender from perceived risk, follow secondary‑market pricing guidelines, or reflect state‑level agency recommendations; they often disappear when the applicant brings a larger down payment or strong compensating factors, which we'll explore next.

A bigger down payment does not change your FICO score, because the score is calculated from credit history, not from how much cash you bring to closing.

However, a larger down payment can make lenders more comfortable with a lower score. For example, the FHA's baseline rule allows a 500 score if you put down 10 percent, while a 580 score works with only 3.5 percent down. Many lenders add overlays that raise the required score, but they often waive or lower those overlays when you offer a higher down payment, effectively improving your chances without affecting the underlying FICO. FHA loan eligibility guidelines illustrate this trade‑off.

Compensating factors let you offset a low FICO score and still qualify for an FHA loan.

• Put down at least 10 % if your FICO score is between 500‑579; the larger equity reduces lender risk.
• Show a debt‑to‑income ratio under 35 %; a low DTI demonstrates repayment capacity even with a weaker credit score.
• Present two years of steady employment and increasing earnings; income stability outweighs past credit blemishes.
• Supply documented rent, utility, or cell‑phone payments that were on time for 12 months; lenders can treat this as a payment‑history substitute.
• Provide cash reserves equal to three months of mortgage payments; solid savings reassure the lender you can handle temporary setbacks.

Documented rent and utility payments can offset a lower FICO score when you apply for an FHA loan. Lenders treat a consistent payment history as a compensating factor, especially if you fall short of the 580/3.5% threshold.

• Provide 12‑month rent receipts, canceled checks, or a landlord‑signed verification letter.
• Submit utility bills (electric, gas, water) showing on‑time payments for the same period.
• Use bank statements that clearly label rent and utility debits.
• Highlight that you have no late‑payment marks on these accounts, reinforcing reliability.
• Ask the lender to accept the rent‑utility package alongside a higher down payment (10% can bring the FHA minimum to a 500 FICO score).

Lenders often weigh this documented stability against a sub‑580 score, so compile the paperwork early and hand it to your loan officer before the underwriting review.

Adding a co‑borrower lets the loan be evaluated with two credit scores, so you can meet the FHA minimum (580 + with 3.5 % down, 500 + with 10 % down) as long as each borrower satisfies that threshold.

If the primary applicant scores 560 but a co‑borrower has 620, the loan can qualify at the 3.5 % down level because both scores are above 580. Both must still meet any lender‑specific overlays, and the co‑borrower must also pass debt‑to‑income and employment checks.

Choose a co‑borrower with a clean credit history and stable income; otherwise, you can improve your own score using the tips in 7 quick ways to raise your FICO. For official FHA credit guidelines see FHA credit score requirements.

Boost your FICO quickly with these seven actions.

1. Pay down revolving balances to below 30 % of each credit limit; the score reacts fastest to lower credit utilization.
2. Clear any delinquent accounts or bring past‑due loans current; even a single 30‑day miss can drop a score by 50 points.
3. Dispute inaccurate items on your credit report; a corrected error can add 20‑40 points instantly.
4. Add a 'pay‑in‑full' remark by requesting the creditor to report a closed, paid‑off account; closed positive items improve the age‑of‑credit mix.
5. Avoid opening new credit lines for at least six months; each hard inquiry costs 5‑10 points and shortens average account age.
6. Become an authorized user on a family member's well‑managed card; the primary's long history and low utilization flow onto your report.
7. Set up automatic payments to eliminate missed due dates; on‑time history builds steadily and prevents future score dips.

These steps raise your FICO enough to meet the FHA baseline of 580 with a 3.5 % down payment, or 500 with a 10 % down payment, before any lender overlays apply.

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• 620 FICO, 3.5% down, clean credit report - meets the FHA 580 minimum, no lender overlay needed; odds of approval are high.
• 560 FICO, 10% down, recent stable employment - hits the FHA 500 threshold with the larger down payment; most lenders will approve, but a few may overlay at 580, lowering odds slightly.
• 540 FICO, 10% down, strong compensating factors (low debt‑to‑income, rent‑payment history) - below the official 500 floor, but lenders often accept with documented compensating factors; odds are moderate to low.
• 500 FICO, 10% down, co‑borrower with 680 FICO - meets the FHA minimum; the co‑borrower's strong score boosts the application, giving borderline but acceptable odds.
• 480 FICO, 10% down, no compensating factors - under the FHA 500 minimum; virtually all lenders will reject, so odds are negligible.

A higher FICO score doesn't change the FHA's official minimums (500 with 10 % down, 580 with 3.5 % down), but it moves you into lower‑interest‑rate tiers that lenders offer because you appear less risky.

The mortgage‑insurance premium (MIP) that the FHA charges is fixed by loan‑to‑value, loan amount and term - not by credit score - so a better score won't lower the statutory MIP rate itself, though it can keep you in a loan program that requires a smaller down payment and therefore a lower MIP tier.

Example:

Borrower A has a 580 FICO score, puts 3.5 % down, and gets a 30‑year FHA loan at 6.5 % interest. With a 96.5 % LTV, the annual MIP is 0.85 % plus a 1.75 % upfront fee.

Borrower B has a 720 FICO score, same down payment, and qualifies for a 5.9 % interest rate. Their LTV and MIP remain 0.85 % because credit doesn't affect the MIP formula, but the lower rate saves thousands over the loan life.

If either borrower raises the down payment to 10 % (allowed even with a 500 FICO score), the LTV drops to 90 % and the annual MIP falls to 0.60 %, while the better credit still nets the lower interest rate. For the official MIP schedule see the HUD FHA mortgage‑insurance guide.

FHA won't accept your FICO score when a lender's overlay sits above the government floor, so you must either eliminate the overlay or meet an alternate qualification path.

You can:

• shop another FHA‑approved lender who sticks to the FHA minimums (500 with 10 % down, 580 with 3.5 % down);
• ask your current lender for the written overlay policy and negotiate a waiver;
• raise your down payment to 10 % to qualify at the 500 threshold;
• add a credit‑worthy co‑borrower to lift the household score;
• present strong compensating factors - low debt‑to‑income, steady employment, documented rent and utility payments - as we detailed in the 'use compensating factors' section.

If none of these work, keep your credit behavior steady, let any errors clear, and re‑apply after a short wait, or explore a conventional loan where the score ceiling may be lower.