August 5, 2024
Many readers want to know if there are any “fair credit” and “no money down” loans for FHA borrowers.
While such options may exist in loan programs offered by other agencies, the FHA Single Family Home Loan program does not have a “zero down” option or a “fair credit” home loan.
FHA mortgage loans for new purchases require a minimum of 3.5% down, which must come from approved sources that have to be verified by the lender.
Some borrowers may be confused by the Department of Veterans Affairs and its VA home loan program.
VA Zero-Down Mortgages
VA loans feature a no-money-down option, but these loans are only available to qualified borrowers who have served a minimum time in the armed services. FHA loans don’t have this option.
Both programs are indeed government-created and backed, but FHA and VA loans are completely independent of each other.
However, the FHA and VA may have certain guidelines in their rulebooks for loans to borrowers with applicable issues related to VA/FHA loans and refinancing from one to the other.
FHA Loan FICO Score Rules
The FHA loan program requires a minimum FICO score in the “fair credit” department. Borrowers with FICO scores of 580 or higher are technically eligible for maximum FHA loan financing.
Those with credit scores below 580 but not lower than 500 can apply for an FHA mortgage, but would be required to make a larger down payment.
That’s not to say that the participating lender won’t have a higher FICO score standard—lenders are free to require higher scores and often do.
Low FICO Scores?
The best course for borrowers with lower-than-ideal FICO scores is to contact the FHA directly by calling them at 1-800 CALL FHA and requesting a referral to a local, HUD-approved housing counselor.
The housing counselor will give advice related to becoming more credit-worthy and preparing adequately for an FHA mortgage.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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