Can I Get Approved for an FHA Loan With a 780 Credit Score?

Buying a home can be challenging. The Federal Housing Administration (FHA) aims to make homebuying more accessible by offering government-backed FHA loans. These loans generally have more flexible qualification requirements than conventional mortgages, and they require lower down payments.

If you have very good credit and are looking into buying a home, you might wonder whether you can get approved for an FHA loan with 780 credit score. 

Can I get approved for an FHA loan with 780 credit score?

Yes, you can absolutely get approved for an FHA loan with a 780 credit score. The FHA loan credit score minimum (with a 3.5% down payment) is 580, but homebuyers with lower scores may qualify with larger down payments.

Because a score of 780 is so far above the minimum, you’ll likely qualify for better rates than someone with poor or average credit.

What a 780 credit score approval looks like in practice

If you have a 780 credit score and aren’t otherwise disqualified from getting an FHA loan, you’ll probably be approved quickly. Here’s how your score may impact your loan terms.

Down payment requirements at 780

Regardless of your credit score, the FHA requires a down payment of at least 3.5%. However, having a score of 780 saves you from potentially having to pay a down payment of 10%.

To get an FHA loan with a 3.5% down payment, your credit score must be at least 580. But in some cases, the true FHA loan credit score minimum is even lower. Borrowers with scores as low as 500 may qualify if they can pay 10% down.

Given the high cost of housing, it can be challenging to come up with more than the minimum down payment. If you’re able to pay more, you might want to consider doing so. 

Any amount you can put toward your down payment is money you won’t have to pay interest on. Larger down payments also translate to lower monthly payments, which may result in less financial stress over the life of the loan.

What rates and terms to expect

With a score of 780, you’ll probably qualify for some of the lowest interest rates FHA loans can offer. These rates are often close to the rates for conventional mortgages, although they’re often slightly higher.

FHA loans also require borrowers to pay mortgage insurance premiums. This involves making an upfront payment as well as ongoing payments:

• You make a one-time payment of 1.75% of the loan amount right away
• You pay another 0.45% to 1.05% of the loan amount each year 

If you wish, you may add the upfront 1.75% payment to your loan. The annual 0.45% to 1.05% payments are automatically added to your monthly payments.

Lenders that may work with a 780 score

Many people with credit scores close to the cutoff are disappointed when they hear that some lenders working with the FHA impose higher credit score requirements. These are called “overlays,” and lenders put them in place to protect themselves from risk.

For example, even though the FHA loan credit score minimum is 580 (for a 3.5% down payment), individual lenders who underwrite the loans might require a minimum score of 620.

Lenders who impose overlays usually won’t make them any higher than 640, so your chances of getting approved with a 780 score are excellent.

Should you get an FHA loan or a conventional mortgage with a 780 credit score?

You can almost certainly get approved for an FHA loan with 780 credit score, but is an FHA loan really the best option? Many people choose FHA loans because they claim that they have lower interest rates. This is generally true for homebuyers with poor, fair, or even good credit. 

However, when you have a very good credit score, you’re more likely to get a better interest rate with a conventional loan than with an FHA loan.

Even if you take interest rates out of the equation, a conventional mortgage might still be the better option because of the way both loan types handle mortgage insurance. FHA loans require you to pay mortgage insurance premiums (MIP), while conventional loans typically require you to get private mortgage insurance (PMI).

Mortgage insurance premiums are often higher than private mortgage insurance, but the real difference is in how long they last:

• The FHA requires you to pay MIP over the life of the mortgage (30 years)
• Conventional lenders let you cancel PMI once you have 20% equity in the home

There is one notable exception to the MIP rule. If you get an FHA loan and put 10% or more down, you may stop paying MIP after 11 years.

Over the course of a 30-year mortgage, MIP can add up to tens of thousands of dollars. If your score of 780 qualifies you for a conventional loan with less costly insurance options, it might be worth considering.

When should you consider an FHA loan, even with great credit?

If you have a credit score of 780, a conventional loan might be a better option than an FHA loan. However, if you have a high debt-to-income ratio (DTI), you might not be able to qualify for a conventional mortgage.

Exact DTI cutoffs vary by lender, but most conventional lenders want you to have a DTI of no more than 36%. If you have excellent credit and cash reserves, lenders might be more flexible, but that’s not a guarantee.

On the other hand, FHA loans generally want you to have a DTI of 43% or less. If you have great credit or other factors that reduce risk for the lender, they might approve you with a DTI as high as 57%.

Conclusion

Having a credit score of 780 is an achievement. Whether you’re working toward 780 or are already there, Kikoff is here to support you. We’re a credit-builder app connecting our members to credit lines, secured credit cards, rent reporting, debt negotiation, and other resources to work toward a better financial future.

If you’re trying to lower your DTI before you buy a home, our app might be able to help with that, too. We can help you track bills and spending while offering personalized insights.

We don’t check your credit when you sign up, and it’s free to join. Create your account with us today!