Credit glossary
FHA loan
A mortgage insured by the Federal Housing Administration that allows lower credit scores and smaller down payments than many conventional loans.
FHA's rules turn on the Minimum Decision Credit Score. HUD's Mortgagee Letter 2026-11 keeps the cutoffs: 580 or higher qualifies for maximum financing, which is 3.5% down on a purchase; 500 to 579 limits the loan to 90% of the home's value; below 500 isn't eligible. For case numbers assigned on or after January 1, 2027, lenders may also use FICO 10T or VantageScore 4.0, and a tri-merge report is still required.
FHA insures loans. Lenders make them, and many set minimums above HUD's, which is why one lender says 620 while another works at 580. Disputes have their own FHA rule: under HUD's guidance, disputed non-medical derogatory balances totaling $1,000 or more push the loan to manual underwriting. Ask how a lender handles both before you apply.
Example
On a $250,000 purchase, 3.5% down is $8,750. If the decision score is 579 instead of 580, the minimum becomes 10%, or $25,000.
Guides that go deeper
- Credit score for an FHA loan: the 580 and 500 rules, explainedFHA allows scores down to 500 with 10% down and 580 for 3.5% down, but lenders add overlays. How FHA picks your score and what changes in 2027.
- The credit scores mortgage lenders actually pull in 2026Mortgage lenders pull FICO 2, 4 and 5 or VantageScore 4.0 from all three bureaus and use your middle score. The 2026 rules and FICO 10T's status.
- What not to dispute on your credit report before a mortgageDisputing accurate items rarely helps, and open disputes can stall a mortgage. How Fannie Mae and FHA treat disputed accounts, and what to do instead.
Sources
- Mortgagee Letter 2026-11: Updated Minimum Decision Credit Score Methodology for the Implementation of Alternative Credit Scores, U.S. Department of Housing and Urban Development
- Single Family Housing Policy Handbook 4000.1, U.S. Department of Housing and Urban Development
- Mortgagee Letter 2013-24: Handling of Collections and Disputed Accounts, U.S. Department of Housing and Urban Development
This is education, not legal or financial advice. Spot an error? Tell us and we'll fix it.