Housing Counselor Certification (HUD) Practice Exam

A minimum qualifying credit score of 580 is established by the Federal Housing Administration (FHA) for borrowers who want to make a down payment of 3.5% on an FHA-insured mortgage. This lower credit score requirement is one of the appealing features of FHA loans, as it provides opportunities for individuals with less-than-perfect credit to access home financing. While a higher credit score can lead to better loan terms and lower interest rates, the 580 threshold allows a broader segment of potential homeowners, including first-time buyers and those recovering from financial setbacks, to qualify for a mortgage. Thus, making a down payment of 3.5% distinctly aligns with the 580 minimum credit score requirement for FHA loans.