Five hundred eighty is not a random number. In FHA lending it is the border between two very different mortgages. At 580 and above, you can put down 3.5%. Between 500 and 579, that same loan requires 10% down. Below 500, the FHA program itself says no.
On a $280,000 house, that gap is the difference between $9,800 cash at closing and $28,000. So the question most people are really asking isn’t “can I get an FHA loan with a 580?” It’s “will a lender actually write one for me, and what will it cost?” Those are two separate answers, and the second one matters more.
The FHA Rule vs. What Lenders Actually Do
FHA insures loans; it doesn’t originate them. The Department of Housing and Urban Development sets the floor at 580 for the 3.5% down option, then hands the file to a bank, credit union, or mortgage company that decides whether to fund it.
Many of those lenders set their own minimums well above HUD’s. A handful of large banks won’t touch anything under 640. Others specialize in the 580–619 band and price accordingly. Same borrower, same house, same FHA insurance, wildly different answers depending on who you call.
That’s why a denial from your checking account bank tells you almost nothing. If you’ve already been turned down somewhere, the guide to FHA loans for bad credit under 620 walks through which lender types are realistically workable and which ones just aren’t built for this file type.
What a 580 Score Costs You in Dollars
Nobody prices a mortgage off credit score alone, but score sits inside the risk model, and at 580 it shows up in the rate. A borrower at 580 might be quoted 7.25% where a 720 borrower gets 6.5% on the same day, same lender. On a $250,000 loan, that half-point spread is roughly $125 a month, or about $45,000 over thirty years.
Then there’s mortgage insurance, which is non-negotiable on FHA:
- Upfront MIP: 1.75% of the base loan amount, charged once. On $250,000 that’s $4,375, usually rolled into the balance rather than paid in cash.
- Annual MIP: 0.55% per year for most 30-year loans with less than 10% down, collected monthly. That’s about $115 a month on the same loan.
- Duration: with 3.5% down, the annual premium generally stays for the life of the loan unless you refinance out of it.
Add the rate difference and insurance together and a 580 borrower can easily carry $240 more per month than someone at 720 on an identical house. That doesn’t make the loan a bad deal. It does mean the quote you get deserves scrutiny, which is what the breakdown of FHA mortgage rates and how to beat the first quote is built to help you do.
Debt-to-Income Usually Decides the File, Not the Score
Here’s the part that surprises people. Plenty of 580 applications get approved. Plenty of 640 applications get denied, and the reason is almost always the debt-to-income ratio.
FHA’s automated system will approve DTI up to about 50% when there are compensating factors, and manual underwriting typically caps it at 43%. Your DTI is all monthly obligations divided by gross monthly income: the new house payment plus car loans, student loans, credit cards, child support, and anything else on the credit report.
Say you earn $5,200 a month. At a 45% DTI, your total allowed debt is $2,340. If the car and cards eat $700, the house payment has to land at $1,640 or less. With taxes, insurance, and MIP included, that’s a purchase price somewhere in the low $200,000s in most markets. Paying off a $250 monthly car loan can move that ceiling more than a 20-point credit gain will.
Loan size matters too. FHA caps how much you can borrow based on the county, and the ceiling varies enormously between a rural area and a high-cost metro. Check the FHA mortgage loan limit for your county before you fall in love with a listing, because the cap alone can rule a house out no matter how clean your file is.
The Paper Trail That Carries a 580 File Through Underwriting
Low scores get read as higher risk, so underwriters compensate by asking for more. Expect a document request that feels a bit relentless. The files that sail through have three things in common.
Clean, explainable money
Down payment and closing costs need a paper trail. Bank statements, retirement account statements, a gift letter with the donor’s transfer record. Cash that appeared three weeks ago and can’t be sourced is a problem regardless of your score. FHA does allow the entire 3.5% to be a gift from a family member, which is worth knowing if your savings took a hit.
Stable income with a two-year story
W-2 employees need recent pay stubs and two years of returns. Self-employed borrowers need two years of returns, a current profit-and-loss, and a reasonable explanation for any year-over-year dip. Job changes are fine as long as they’re upward and in the same field.
No new debt during the process
Financing a couch in week three of escrow can reprice or kill the loan. Lenders re-pull credit before closing. This one derails more 580 files than any underwriting guideline.
First-time buyers tend to underestimate closing costs, which run 2% to 5% of the purchase price on top of the down payment. The real-numbers walkthrough for FHA loans for first-time buyers lays out what actually shows up on the settlement statement.
Moving From 580 to 620 Is Worth Real Money
A rapid rescore can update a credit file in a week or two rather than waiting for the next monthly reporting cycle, and it costs little or nothing through a lender that offers it. Three moves tend to produce the fastest movement:
- Pay revolving balances below 30% of each card’s limit, ideally below 10%. Utilization is the single heaviest-scoring lever you control.
- Ask for goodwill deletions on any late payment under 24 months old, in writing, from the original creditor.
- Dispute genuine errors, but don’t open new accounts to “build mix of credit” mid-process. New inquiries and lower average account age both hurt.
A 30-point gain might not change your approval at all. It can change your rate enough to save $60 to $100 a month, and pushing toward 620 opens up more lenders who price the 580–619 bracket conservatively or not at all.
When the Score Sits Between 500 and 579
The door isn’t closed, it’s just more expensive and narrower. FHA allows 10% down in that range, and a smaller group of lenders will write it. Manual underwriting becomes the norm rather than the exception, which means compensating factors carry the file: reserves in the bank, a long history with the same employer, a utility payment record showing on-time behavior, or a rent verification with twelve months of cancelled checks. The lender-by-lender reality for FHA loans with a 500 credit score is worth reading before you spend money on application fees.
Three Traps That Catch 580 Borrowers
Paying for an appraisal too early. Ask two questions before you spend a cent: what is your minimum credit score for an FHA loan, and do you run manual underwriting? A lender who says 620 has saved you $500 and three weeks.
Accepting the first rate because you’re relieved to be approved. Get three Loan Estimates on the same day. The spread on identical FHA loans at 580 frequently runs 0.75% or more, and it costs you nothing to compare.
Letting a broker talk you into a higher-cost non-FHA product. Sometimes a conventional loan with mortgage insurance is genuinely cheaper at 580, but sometimes it’s just a bigger commission. Ask for both scenarios in writing, side by side, with the total five-year cost of each. The FHA version often wins once the rate and insurance are laid out honestly.