If denied for an FHA loan, applicants should first review their credit report for errors and address any inaccuracies. Improving a credit score through timely payments, reducing credit utilization, and resolving collections can help meet FHA requirements, which typically mandate a score of 580 or higher. If the score remains below 580, a larger down payment (10% minimum) may be necessary. Additionally, lowering debt-to-income (DTI) ratios by paying off debts or securing new employment can enhance eligibility. Exploring alternative loans like VA or USDA mortgages, which have less stringent requirements, is also advisable. Non-traditional lenders may offer flexible terms for borrowers with unique financial situations.

FHA loans require a minimum credit score of 580 for a 3.5% down payment, as per HUD guidelines. Borrowers with scores below 580 must put down at least 10%, according to Federal Housing Administration (FHA) rules. A DTI ratio exceeding 43% often disqualifies applicants, though exceptions exist with compensating factors like strong income stability. Credit report errors affect 20% of consumers, as reported by the Federal Trade Commission (FTC), delaying approvals if unresolved. For example, a 2022 study by Fannie Mae found that 65% of rejected FHA applicants had credit score deficiencies or DTI issues. VA loans, which require no down payment, are an alternative for eligible veterans, while USDA loans offer 3% down for rural areas. Non-traditional lenders, though offering higher interest rates, provide options for borrowers with non-standard income or assets. These steps address common barriers and align with national lending trends to secure mortgage approval.