What you need to know about FHA loans and 500 credit scores
If you’re worried your 500 credit score might disqualify you from buying a home, there’s good news: FHA loans could be the opportunity you’ve been waiting for.
✅ Can You Really Get an FHA Loan with a 500 Credit Score?
Yes — but there’s a catch.
The Federal Housing Administration (FHA) allows borrowers with credit scores as low as 500, but there are conditions:
- 500–579 credit score: Minimum 10% down payment required.
- 580 and above: You may qualify with just 3.5% down.
That means even with damaged credit, homeownership is still within reach.
💡 Why FHA Loans Are a Smart Option for Low Credit Borrowers
FHA loans were designed to help people just like you — first-time homebuyers or those rebuilding financially.
| FHA Loan Feature | Benefit to You |
|---|---|
| Low Credit Acceptance | Approval starting from 500 scores |
| Low Down Payments | Just 3.5% if credit is 580+ |
| Flexible Income Rules | DTI ratios up to 57% allowed |
| Gift Funds Allowed | Down payment help from family accepted |
| Government-Backed | Lenders more willing to approve |
🚫 What You’ll Need to Watch Out For
While FHA loans are forgiving, they come with a few strings:
- Mortgage Insurance Premiums (MIP): Required monthly, regardless of your down payment.
- Stricter Property Standards: The home must meet FHA guidelines.
- Higher Interest Rates: May apply for scores under 580.
Still, in many cases, these trade-offs are worth it to stop renting and start building equity.
📝 What You’ll Need to Qualify
Even with a 500 credit score, here’s what lenders will look at:
- Proof of steady income (W-2s, pay stubs, or tax returns)
- Low debt-to-income ratio (ideally under 43%)
- 2+ years of work history
- Explanation for any past credit issues
📌 Pro Tip: Many lenders use a manual underwriting process for scores under 580 — so be ready to show documentation.
🔍 Where to Find FHA Lenders Who Accept 500 Credit Scores
Not all lenders approve borrowers under 580. That’s why it’s key to work with FHA-approved lenders who specialize in low credit financing.
🏁 Final Thoughts: Don’t Let Your Credit Score Hold You Back
Your credit score doesn’t define your future — and FHA loans prove it. Whether you’re recovering from financial hardship or starting over, you still have a path to homeownership