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Module 02 · Foundational · 20 min

FHA Credit Requirements

FHA is the most credit-flexible widely-available program. This module covers minimum scores, the 580 / 500 down-payment break, manual underwriting, and the most common FHA credit overlays.

Learning Objectives
  • State HUD minimum scores and matching down-payment requirements
  • Differentiate HUD floors from lender overlays
  • List FHA's treatment of collections, judgments and charge-offs
  • Explain the seasoning rules after Ch. 7, Ch. 13, foreclosure, and short sale

HUD Minimum Scores

HUD sets the floor; individual lenders add overlays on top.

  • 580+ → 3.5% down
  • 500–579 → 10% down
  • Below 500 → ineligible
  • Most lender overlays: 600–640 minimum

Collections, Judgments, Charge-Offs

FHA does not require non-medical collections under $2,000 to be paid. Aggregate collections over $2,000 trigger a capacity test: count 5% of the balance as a monthly debt unless documented otherwise.

Open judgments must be paid or on a documented payment plan with 3 months of on-time payments before closing.

Waiting Periods After Derogatory Events

FHA seasoning is shorter than Conventional, which is why it is often the bridge program after a credit event.

  • Chapter 7 bankruptcy — 2 years from discharge
  • Chapter 13 — 1 year of on-time plan payments + court approval
  • Foreclosure — 3 years from completion
  • Short sale / deed-in-lieu — 3 years
Key Takeaways
  • 3.5% down requires a 580 FICO; 10% down opens the 500–579 band.
  • Lender overlays usually push the practical minimum to 620–640.
  • FHA waiting periods are the shortest of the agency programs.
End-of-Module Exam

Module 2 Exam — 5 questions

Pick the best answer for each question. Pass with 80% or higher to mark this module complete.

  1. 1.

    What is the minimum FICO for 3.5% down on FHA per HUD?

  2. 2.

    A buyer is 18 months out of Chapter 7 discharge. Are they FHA-eligible?

  3. 3.

    Aggregate non-medical collections of $3,500 on an FHA file will:

  4. 4.

    FHA waiting period after a completed foreclosure is:

  5. 5.

    When a lender requires a 640 FICO on FHA, that requirement is:

0 of 5 answered