Credit-score requirements:

  • For an FHA loan with a down payment as low as 3.5 percent, the borrower’s credit score must be 580 or higher.
  • Those with credit scores between 550 and 579 must pay at least 10 percent down.

People with credit scores under 500 generally are ineligible for FHA loans. However, there may be some wiggle room there. The FHA does make allowances, under certain circumstances, for applicants with “nontraditional credit history or insufficient credit” if other criteria are met.

If you have had a bankruptcy or foreclosure, you may still qualify. Call our office to discuss your specific circumstances.

DTI (Debt-To-Income) Ratio:

This is definitely a large factor. DTI is the ratio between projected monthly payments and monthly income. If that gap is not large enough, it can disqualify a prospective borrower. In other words, if their income is not large enough in comparison to the mortgage plus the borrower’s current debts, (credit cards, student loans, car loans, etc.) then it can make the prospective homeowner ineligible to receive the loan. This means the loan amount may need to be lowered or some debt may need to be paid off. Doing one or both of these may reduce the DTI enough so you can qualify for a mortgage.  If this does not work, we may need to add a co-borrower.  Contact us today to discuss your options.  

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A credit score assists in measuring your ability to repay a debt in the future.


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