FHA Increases Minimum Credit Score Requirement
FHA And VA Increase Credit Score Requirement
Effective March 6, 2009, a minimum credit score of 620 will be required to be eligible for FHA and VA loans.
The credit score requirement had recently been changed less than a month ago. As of February 9, 2009 the credit guidelines had required only a minimum credit score of 580, subject to certain exceptions.
The increased credit score requirement is an attempt to lower the large number of FHA defaults, which have been running at about 12%. A 580 credit score reflects a sub prime borrower and in conjunction with minimal down payment requirements, the risk of mortgage default is very high, as reflected in the FHA default ratios.
New Home Buyers With Empty Pockets After Closing
Another area that should be examined by the FHA in their underwriting guidelines is the amount of reserves that a borrower has after closing on a home purchase. Many borrowers are left with empty pockets after paying for closing costs and the down payment to purchase a home. As every homeowner knows, the expenses of maintaining a home are never ending. In addition, a major and unexpected repair could be thousands of dollars that can put a severe strain on the family budget, leading to the inability to maintain the mortgage payments.
There are no guidelines per se that require a potential home buyer to have a specific amount of savings available after purchasing a home. The ability to save should be viewed by the FHA as a prerequisite for home ownership. Additional mortgage defaults do not benefit the FHA nor the homeowner. Savings (reserves) of 3 to 6 months of mortgage payments should be considered by the FHA as a part of their underwriting guidelines. Buyers might have to postpone the purchase of a home to acccumulate some savings and strengthen their financial position, but the end results would benefit all - a stable housing market with fewer defaults.
Update Regarding 620 FICO Score Requirement - April 2009
There are now some lenders that will do FHA loans at sub 620 FICO scores - see Sub 620 FICO Score Lenders
Our lender was able to find someone who’d take a low score of 585 along with my husbands of 620 but is now telling us that all the down payment can not be gifted. Any suggestions?
Take a look at this post. It explains why different lenders have different rules….
http://www.nuhomesource.com/blog/did-fha-raise-the-minimum-credit-score-to-620-640-or-even-660.html
Please note that FHA DOES NOT have a minimum credit score, this 620 you speak of is not correct. Many wholesalers have placed their own internal score requirements (of which 620 is the typical minimum) BUT FHA has not implemented a minimum score as of yet. There is talk of a 560 FHA minimum unless borrowers have 10% down but that is still not yet in place.
Hi my name is Kevin Blake and I work for a Direct Lending Bank and we go down to a 580 credit score for Purchases and Refinancing. If anyone is interested we are licensed in 40 states and all i need is 5 minutes of your time. please call me toll free at 1-877-733-4432 Ext. 686 Thank you
We have many lenders that we can refer to you. All have worked out great with us. This is for the Los Angeles area. You can contact me at http://www.BedrockEstates.com
Good luck everybody!
TJ Powers
HUD has posted an advisory and YES, there are minimum FICO’s and/or down payment requirements…..
“New borrowers will now be required to have a minimum FICO score of 580 to qualify for FHA’s 3.5% down payment program. New borrowers with less than a 580 FICO score will be required to put down at least 10%.”
http://portal.hud.gov/portal/page/portal/HUD/press/press_releases_media_advisories/2010/HUDNo.10-016