FHA loans with a 580 credit score and 3.5% down payment:

FHA allows you to buy a home with only 3.5% and a 580 credit score. Most lenders require 620-640 credit score, but there are lenders that will go down to a 580 credit score.

✅ Basic FHA Guideline

• Minimum credit score: 580

• Minimum down payment: 3.5%

✅ Debt-to-Income (DTI) Ratios with Automated Underwriting (AUS)

• Housing (mortgage only): 46.9%

• Total debts (including mortgage): 56.9%

✅ If AUS Denies → Manual Underwriting

• Requires stricter DTI limits depending on compensating factors:

  • No compensating factors → Max 43% DTI

  • 1 compensating factor → Max 47% DTI

  • 2 compensating factors → Max 40% front-end / 50% back-end DTI

✅ FHA-Recognized Compensating Factors (5 total)

1. 3 months of mortgage payments in reserves (savings).

2. Strong residual income (after expenses).

3. No other debts besides the new mortgage.

4. Rent history showing current rent = proposed mortgage payment.

5. Extra income not being used to qualify.

👉 Key Point: While FHA officially allows a 580 score with 3.5% down, many lenders set their own overlays (stricter requirements, usually 620–640). That’s why finding a lender willing to do 580 can be trickier—but Barclay Butler Financial (as in your note) is one that does.

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