What does the FHA require from borrowers in terms of credit history?

The Federal Housing Administration (FHA) has specific guidelines regarding the credit history of borrowers to ensure that they have a reasonable level of creditworthiness. It requires borrowers to have a minimum credit score of 580 to qualify for maximum financing, which allows them to obtain the lowest down payment option possible, typically 3.5% of the purchase price. This requirement is designed to accommodate individuals who may have less-than-perfect credit but still demonstrate the ability to repay a mortgage.

By establishing a lower credit score threshold compared to conventional loan requirements, the FHA aims to make homeownership accessible to a broader range of borrowers, including first-time buyers and those with lower income levels or credit challenges. This approach helps stimulate home buying in various economic climates.

Other requirements related to credit history may still apply, such as the need for a demonstrated repayment history and stable income, but the specific focus here on a minimum score of 580 for maximum financing underscores the FHA's role in promoting responsible lending.