FHA Loan With Bad Credit in Texas — What Score Do You Actually Need?

If you’ve been told you can’t buy a home because of your credit, there’s a good chance you’ve been talking to the wrong lender. FHA loans exist specifically for buyers who don’t have perfect credit — and the requirements are more achievable than most people realize.

I’ve been originating FHA loans in North Texas for 27 years. Here’s exactly what you need to know.

The Official FHA Minimum Credit Score

The FHA sets two tiers based on your credit score and down payment:

• 580 or above: Eligible for 3.5% down payment. This is the most common FHA path.
• 500–579: Eligible with a 10% down payment. Fewer lenders offer this tier, but it exists.
• Below 500: Not eligible for FHA financing regardless of down payment size.

Important: these are FHA’s minimums. Many lenders add their own overlays — meaning they require 600 or 620 even though FHA allows 580. If one lender says no at 580, that’s a lender restriction, not an FHA rule. Shopping lenders matters.

What Else FHA Looks At Beyond Credit Score

Your credit score is just one part of the picture. FHA underwriters also evaluate:

• Payment history pattern: A score of 600 with 12 months of on-time payments looks different than a 600 with recent lates. The trend matters.
• Debt-to-income ratio (DTI): FHA allows up to 57% DTI in some cases, but most automated approvals come in under 45–50%.
• Collections and judgments: Medical collections under $2,000 are often ignored. Non-medical collections may need to be addressed.
• Bankruptcy waiting periods: Chapter 7 requires 2 years from discharge. Chapter 13 allows applications after 12 months of on-time plan payments (with court approval).
• Foreclosure: 3-year waiting period from the date of foreclosure.
• Employment history: 2 years of consistent employment in the same field. Gaps need explanation.

How Credit Score Affects Your FHA Rate

Getting approved is one thing — getting a payment you can live with is another. Your credit score directly affects the rate you’ll be offered:

• 760+: Best available rates
• 720–759: Very good rates, minimal premium
• 680–719: Good rates, modest premium
• 640–679: Moderate rate premium — may still make financial sense
• 580–639: Higher rate — worth calculating total cost vs. waiting to improve score

On a $300,000 FHA loan, the difference between a 580 score and a 680 score might be 0.75–1.25% in rate — which translates to $150–$250 more per month. Sometimes it’s worth waiting 6 months to improve your score. Sometimes it’s better to lock in now and refinance later. That calculation depends on your specific situation and the North Texas market.

FHA Mortgage Insurance — What Bad Credit Buyers Need to Know

FHA loans require two types of mortgage insurance regardless of your credit score or down payment:

• Upfront MIP: 1.75% of the loan amount, typically rolled into the loan
• Annual MIP: 0.55% per year for most buyers, paid monthly

Unlike conventional PMI, FHA MIP does not automatically cancel when you reach 20% equity. If you put down less than 10%, it stays for the life of the loan. If you put down 10% or more, it cancels after 11 years. Most buyers refinance out of FHA into a conventional loan once their equity and credit improve.

Common Reasons FHA Gets Denied Even With a 580+ Score

Hitting the score minimum doesn’t guarantee approval. Here are the most common reasons FHA files get denied:

• Recent late payments (last 12 months) — even one 30-day late can cause problems
• DTI too high — especially combined with student loans on income-driven repayment plans
• Unresolved tax liens or judgments
• Not meeting the 2-year employment requirement
• Property not meeting FHA minimum property standards (this is a property issue, not a borrower issue)
• Insufficient documented funds for down payment and closing costs

The Right Strategy for Bad Credit FHA Buyers in Texas

If your score is between 580–620, here’s the approach I recommend:

1. Get a full credit review with a mortgage lender before doing anything else
2. Identify the 1–3 items most likely to move your score quickly
3. Ask about a rapid rescore if there are correctable items (paid accounts, errors)
4. Get pre-qualified so you know your actual buying power
5. Decide whether to buy now or wait 3–6 months based on the real numbers

North Texas home prices have been relatively stable in 2026, but inventory is still limited in Collin County. There’s a real cost to waiting if prices move up during your credit repair period. That math is worth doing before you decide to delay.