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
Update on This Topic:
-See FHA Introduces New Minimum 580 Credit Score Requirement, September 6, 2010
I am curious as to your source for this information on FHA credit scores. as far as I am aware or can find in HUD’s updates, at this time HUD/FHA has issued no Mortgagee Letter indicating a change in credit score requirements.
Is it possible that you are confusing some lender requirements with FHA requirements? Some lenders are still allowing 580 scores, a very few are still allowing 500-550 scores with lower loan to value, and some have raised the requirement to 620, but this is a lender change, not an FHA change.
Thanks!
Carl,
You make a very good point with which I agree. There is no formal announcement by HUD and I did not say that there was. Sources tell me that it is probably going to happen; maybe the major banks are “front running” the change.
The new minimum credit score requirements were announced by a major bank and they tend to follow each other, so I expect these changes to be industry wide.
Since a consumer can’t directly apply to the FHA, if every major bank applies the 620 score requirement, then there would be a de facto min of 620.
The lenders that still allow lower scores are very tough to get approvals from. I think the bottom line is that very very few borrowers without a 620 FICO score will get FHA loan approvals.
Bill
Making loans to borrowers with a 580 credit score and no cash reserves seems to be a recipe for future trouble.
It is the banks that are pushing the 620 minimum FHA score, which is only 20 points below what conventional lenders require for owner occupied properties! Based upon what I know about the performance of those w/whom I primarily have serviced, a 600 middle score does not represent excessive risk of default. Additionally, because the ability to save is premised upon the ability to earn money, and given that wage earner African Americans are consistently at the bottom of the salary strata, creating an underwriting requirement for 3-6 mos of reserves after closing would substantially eliminate the pool of eligible buyers; 2 mos of reserves, a current FHA requirement, should remain and, in fact, be universal. The difference should be more reserves for multifamily properties, 2-4 units
The government should be looking into helping the condo sales by stopping Lenders from precluding financing in projects with higher delinquency. They are eliminating almost 100% of the condos! Instead, the Lenders may require higher down payment to offset their risk! Otherwise, as it is today, all of those hundreds of thousands condo units are ONLY available to cash buyers, and THIS IS NOT HELPING!!!
THERE GOES THE AMERICAN DREAM DOWN THE HILL, AGAIN!!!!
I am under contract and i am one almost fell victim to the new changes (620 credit score). I easily have 3 months reserves (after closing) but my score was 593. So had i not been under contract i would not be able to get in on these good deals. Now i will be paying a whole $200.00 less on my mortgage than i do now in rent.
I am unfortunately one of the ones who didn’t make it in time for the 580. I had an offer accepted already to go and then this change happened and I didnt have enough time to act. My credit score is only bad becuase of a dumb mistake we made with our flex plans. My husband forgot to cancel his when I enrolled in mine so we had way too much paid out. Thus I was delinquent on my school loan, which has since been caught up. Too bad I am the one with the higher income and he is the one with the good credit now. Very discouraging as we really are tired of renting in a not so good neighborhood. The reason for applying with FHA is the $8K refund would allow my husband to finish school much sooner by not working full time. Any suggestions?
So, what you’re saying is that even if I have an LSR, with a credit score within the 580 – 600 range, I cannot secure a loan. Even with an LSR! My mortgage broker told me that my approval could NOT be reversed. I was told it was “good to go” and to go find a house.
My credit scorw is a 598 and i been tryin to get my credit fix but really cant because i got divorce 5yrs ago and my ex wife has a house she cant afford and pay on time and Citi Mortgage has not foreclosure on the house and it killing my credit. I have ask her to refiance but she dont have the credit.
My husband and I lost out on buying a HUD foreclosure because the score requirements changed halfway through our contract. It was a modest $47500 home. We both have a 585 mid score. We have never been late on a mortgage payment in the past and both of us have owned several homes. Our scores are due to his business going under and also my medical problems. I think too much emphasis is put on scores and not how people have paid their mortgages in the past.
I called FHA(HUD) and they explained that they do not have a credit score minimum requirement. This increase is by the banks not FHA and I feel compelled to sue them for false advertisement. I am paying rent that is way higher than a mortgage would be. This is not fair to people who can afford a mortgage but do not have the credit score banks desire what ever happened to “Fair Credit” I say you need to do your homework and find a bank that will allow the mortgage to go through. They have to be out there somewhere… Maybe out of your state?
You should have read the comments above regarding this matter –
“Since a consumer can’t directly apply to the FHA, if every major bank applies the 620 score requirement, then there would be a de facto min of 620.
The lenders that still allow lower scores are very tough to get approvals from. I think the bottom line is that very very few borrowers without a 620 FICO score will get FHA loan approvals.”
The banks ARE the FHA in this case and they have increased FICO score requirements due to the losses they have been taking on lower credit score loans. 620 is actually a very low credit score but it should not be hard to get to this level with a little bit on work on the credit. There are free consumer counseling agencies that can help with this. FHA defaults are running in excess of 12%, which is largely a result of loose past underwriting practices.
The last thing the country needs now are more delinquent homeowners and foreclosures. Theoretically, the tougher guidelines protect borrowers, reduce loan losses and will limit future foreclosures.
The system may be imperfect but that’s the way it’s working right now.
Does this affect FHA 203k Loans?
I was caught up in this min credit score change myself. Was advised last week that the 3 banks that approved my mtg has backed out because I was 6 points away from the 620 requirement. how can these banks promise u something and when a closing date has been set, they decide to back out. My realtor has sent all of my paperwork over to Flagstar bank because from what I understand they are the only bank in the US that may approve an FHA without the min 620 score, but that was until last Friday the 20th and after that they will no longer do the loans below the 620 score. I’ve called them all this week and have not received any callbacks, this bank, I think may be the worse when it comes to communicating. Guess no one will ever have that “American Dream” unless they’re making millions because everyone makes mistakes but the automated systems don’t care, and nor does the banks, so homes will just sit on the market unsold b/c a whole lot of people won’t be getting any loans
Do you ever wonder what will happen to the “credit industry” in the coming years? As lenders tighten their fists, people are seeing their scores drop, even people who’ve never paid late.
Ever think, “who the heck is the Fair, Issac Corporation — and why do they have such control over our lives?” I really see a clear analogy between how we’re FICO-cowed in the 21st century, just as European peasants and serfs were cowed by the Church in the Middle Ages — the Priests had all the power and control over not just the peoples’ present, but their futures, and their children’s futures as well!
I earn a salary because I work in the lending industry, and I am thankful that the organizatino I work for really is a “good” lender — I KNOW that my company truly cares about helping people achieve the dream of home ownership — but man, there are a lot of weasels out there.
FICO keeps the “populous” under control, just like the monks did a thousand years ago. We live in fear.
I was a few days from closing on my home when they came back and told me that I was all of sudden NO LONGER qualified. The mortgage company blamed me for not getting my info to them in time as they told me that the minimum score would go up. My score is a 583 and I lost about $1,000 bucks for the appraisal and home inspection fees. I had submitted all of my info by Feb 26th and the changes didn’t start going into affect until March. I too feel compelled to sue the mortgage company because I feel like they are the ones that did not get my paperwork in on time.
Does anyone have any idea how long the new minimum score requirements will remain in place? I heard that it is temporary.
I sympathize with your issues here. Here’s a couple of lenders who might be able to help out with a sub 620 FICO score FHA loan.
Mid-Island Mortgage Corp says it can do sub 580 fico score FHA loans. In fact, their loan matrix shows that they can go as low as a 500 FICO with restrictions. I happened to come across an email from them. They do business in 9 states and their web site is:
http://www.mortgagecorp.com/index.php
I don’t know first hand how good they are at getting results and keep in mind that I frequently see companies promise more than they can deliver. Sub 620 FHA loans are very difficult to get approved and accordingly, I would be reluctant to pay any fees upfront, including the appraisal. Try to get the lender to bill you for the appraisal at closing. If the lender won’t bill you for the appraisal, they may have doubts that they can get your loan approved.
Another company that advertises they will do FHA to 580 is GMACMortgage –
http://www.gmacmortgage.com/index.html
I believe GMAC is nationwide.
The mortgage company I work for does not deal with either one of these lenders so, once again, I have no feedback on how good they are but I would be interested in hearing about anyone’s experiences.
Good luck.
Bill Zielinski
I am able to lend to borrrowers with a 600+ score. If you are interested and live in South Dakota, North Dakota, Minnesota, Iowa, Wisconsin, or Michigan, please contact me at becky.colsch@riverhomelending.com.
“I want a mortgage with sub-580 scores, and no money for closing costs.”
ARE YOU KIDDING ME!?! LOOK AROUND! That is what got us into this MESS!
NEWS FLASH! — You are RENTERS
NOT HOMEOWNERS!!!!!!!!!!
If you are below 580…take 2 years and clean up your credit.
Well we we put in our offer we were well above the 580 and the 620 but some A…… opened a credit card fraudlently in my husbands name ran it up. so after 2 months of proving it wasnt us. our score is just now at a 598 and we find out today that you will nee a 620
It is funny how the renters are paying more than owners. I have a friend that recently became a home owner and she is paying 1440 for her mortgage, of course this does not include her electric, gas and water but I am paying 1645 in rent which does not include my electric that runs me about 200 monthly. I am aware that everyone has different situations and reasons for home ownership, It appears that persons that need a home cannot achieve homeownership although the homes are very affordable now.
1st continental mortgage have what they call a flex fha loan program the only diffrence is that you have to show rental receipts on time for the past 12 months and have the standard 2 months reserves in the bank tele no 1-888-427-5442. I had finally gotten my middle score to a 580 and they changed it to a minimum of 620!
There are some legitimate lenders that are doing sub 620 FHA loans. See “Sub 620 FICO Score FHA Lenders” April 10, 2009.
I do FHA with 580 score.. Contact me for help
brokers,realtors,consultants all welcome!
Branch Opportunities available
* 580 FICO MANUAL UNDERWRITING
* COUNTRIES LOWEST RATES ON FHA, CONFORMING & JUMBO
* HIGHEST YSP & NO LIMIT ON FRONT POINTS
* FAST CLOSINGS
* FAST FUNDING
* FHA 5.5% PAYING 3 YSP
* STATED PROGRAMS AVAILABLE
EMAIL ME WITH LOAN SCENARIOS
FICO580@gmail.com
we have a score of 607,608 last month we found out about the 620 min that is bs . 2yrs ago we had 560 and we were told to clean up and we have spend the last 2yrs doing so. to find this
Is the middle score a widely held standard? I have a 603, 607, and 637. I am just now beginning to research buying a home and the FHA backed loans. I was told by Suntrust that I would need to bring my middle score to 620 before I could be approved.
See Sub 620 FICO Score Lenders
Is there anyone in Chicago land area still doing 580 FHA Loan. I am 2 weeks before are closing date and just was told that I need at FHA score of 620
The loan brokering industry has changed significantly over the past few years.
One of the main changes is on their minimum credit score requirement on FHA VA Programs.
Many wholesale lenders are requiring a 620 minimum credit score.
There’s Hope!!!
I work directly with US Bank’s Nationwide Home Mortgage division which allows me to offer a
No Minimum Credit Score requirement on our FHA VA Programs.
Realtor’s, Mortgage Professionals and Consumers are all welcome to contact me.
As the industry keeps challenging us it’s good to know that there are options.
Homeownership is my community pledge to you.
Contact:
Direct: 562-795-7544
E/M scott.lambert1@usbank.com
Low Credit Score FHA Loan
The loan brokering industry has changed significantly over the past few years.
One of the main changes is on their minimum credit score requirement on FHA VA Programs.
Many wholesale lenders are requiring a 620 minimum credit score.
There’s Hope!!!
I work directly with US Bank’s Nationwide Home Mortgage division which allows me to offer a
No Minimum Credit Score requirement on our FHA VA Programs.
Realtor’s, Mortgage Professionals and Consumers are all welcome to contact me.
As the industry keeps challenging us it’s good to know that there are options.
Homeownership is my community pledge to you.
Contact:
Direct: 562-795-7544
E/M scott.lambert1@usbank.com
Are there any lenders that do sub 620 FHA loans in Wisconsin ( Milwaukee)
I work for one of the largest FHA lender in the country. We are:
– Ginnie Mae Approved.
– FHA Refinance down to 500 FICO
– FHA Purchase down to 530 FICO
– Originating government loans over 20 years.
– License in over 45 states.
– We also have some programs which do not require FICO score, debt to income ratio not being a factor.
If anyone is interested, do not hesitate to contact me ecash4u2@gmail.com. Everyone is welcome!!
As of July 21, 2009
Offering the following at US Bank
* FHA Program
– No Minimum Credit Score Requirement
– 3.5% Down Payment. Can be Gifted.
– Seller Paid Closing Cost to 6% of Purchase Price
* Rural Developement(USDA)
– 100% Financing
– No Minimum Credit Score Requirement
– No Mortgage Insurance
* Community program
– No Minimum Credit Score Requirement
– No Mortgage Insurance
– 97% Financing. CA, AZ, MI to 95%
* Luxury / Jumbo Loan Portfolio Program
– 85% to 1 Million
– HELOC Option to advoid Mortgage Insurance
– Loan Amount exceptions on a case by case basis.
– Call for more options
Your trusted loan advisor
Scott Lambert
US Bank
scott.lambert1@usbank.com
562-795-7544
As of July 21, 2009
* FHA Program
– No Minimum Credit Score Requirement
– 3.5% Down Payment. Can be Gifted.
– Seller Paid Closing Cost to 6% of Purchase Price
* Rural Development(USDA)
– 100% Financing
– No Minimum Credit Score Requirement
– No Mortgage Insurance
* Community Program
– No Minimum Credit Score Requirement
– No Mortgage Insurance
– 97% Financing. CA, AZ, MI to 95%
* Luxury / Jumbo Loan Portfolio Program
– 85% to 1 Million
– HELOC Option to avoid Mortgage Insurance
– Loan Amount exceptions on a case by case basis.
– Call for more options
Your trusted loan advisor
Scott Lambert
US Bank
scott.lambert1@usbank.com
562-795-7544
Kevin DeLory
Sr. Account Executive
Mid-Island Mortgage Corp
401-333-4520 Office
401-241-2336 Cell
508-276-0625 Fax
Kdelory@mortgagecorp.com
HUD 341-8900237
Back to the basics of FHA lending. Common sense UW…
NO fico score requirements.
Mid-Island MortgageCorp.
Serving the Industry Since 1959
Hi, I am in Texas looking for an FHA loan. Middle score is 550 husbands is 600. He has one late on a credit card in Feb and I have a late on a Conns acct in Jan. Is there any help for us or no? We have the 3.5 DP.
In the process of getting FHA loan approved. All of our stuff is sent in, just waiting to hear back, but know I’m a bit nervous. The loan officer at First Federal told us that my husband cannot be on the loan since his credit ave. is 624. Mine is 709. He said the limits were upped this summer. I cannot, however, find any information to support this. He also informed me after we started the process that First Fed. is not an appproved FHA lender so our loan won’t even be through there? We have 3.5% ready and closing and 3 months of mortgage payments ready. Any help/comments??
-Concerned in Ohio-
We do FHA loans down to 560 FICO scores. We are a FHA DE Lender and FannieMae Lender. If any of you need assistance or further information please email me or call me at (866) 562-6597 Ext. 184. There seems to be a lot of misinformation floating around.
I spoke to a loan officer at Bank of America and asked him what was the min. score for FHA loans. He said FHA does not have a min. score requirement. He went on to say what they look at is the last 2 years of credit. If there is a late payment a letter of explanation will be requested. Should have 3 credit lines open and paid on time for last 2 years. If less than 3 lines open, alternate credit can be requested like utility bills and the such. Also 12 months rental payment history will be requested. He said he has help closed loans with scores in the 520s, 560s and 590s! This is BANK OF AMERICA! I will call again and speak with another rep as I am not believing this totally, although it came from B of A Loan officer. Called their toll free number….please call also and post your answers given.
i have a middle fico 586
4 yrs bankruptcy in 4 yrs dismissed
2 years on job
39,000 yearly
want to purchase a condo 65,000
140,000 value in the state of MI
313 412 3593
dianebabytwo@yahoo.com
I currently have a FICO score of 580. I have not been late on anything in the past 4 years. I am looking to get an FHA loan and I am a little concerned with all the talk about the FHA min FICO score being 620. Has anyone had any luck with getting FHA approved with a FICO score below 600 and if so any suggestions on the what mortgage companies that offer these loans?
Call me at 800-779-1239 ext 369. Our mortgage bank has a minimum fico requirment of 560. We routinely close loans in the fico score range of 560-619 that most lenders cant. We are a ginnie mae endorsed lender which gives us this flexability. I look forward to speaking with you soon.
Actually, the new minimum credit score one must have to qualify is 640
Please read below regarding our FHA Loan program:
Given the current credit environment and loan performance, lenders throughout our industry continue to tighten underwriting guidelines and credit standards for government loans as well as conventional loans. Many lenders have established a minimum FICO as a credit management tool. US Bank does not have a minimum FICO for Retail Customers but prefers to utilize a formalized exception process for loans with low FICO Scores as its way to manage risk.
Contact Scott Lambert @ US Bank:
scott.lambert1@usbank.com
562-795-7544
As a real estate professional – Scott Lambert at US Bank has been absolutely terrific to work with. It’s funny because when I first met Scott, he told me to talk to as many other brokers as I could. “But,” he said, “you will come back to me because I will be truthful, honest and give your clients the facts upfront so you don’t waste your time.” He was spot on! Recently, I was working with a home builder on a Sub 620 Credit Score FHA Deal who was persuading me to work with his broker and I kept hearing in the back of my mind, “call Scott, he’ll tell you what you can do with this.” Instead, I followed the home builder and tried to work with his broker who supposedly “did these types of deals.” My client ended up losing the deal. Talking with Scott first (I found out after it was too late) would have been the single best thing we could have done because we would have been able to close escrow the first time. We eventually closed an FHA escrow with a sub 620 credit score thanks to Scott. I don’t only work with Scott for my clients (but that alone should tell you a lot), my family and I are working with him on our new home purchase. He has access to so many different loan programs out there that he found us the VERY BEST options available with an extremely low rate compared to other lenders. I know this probably sounds too glowing, but I have never worked with someone who was willing to take the time and listen to myself and my client’s needs at nearly anytime. Scott has my business for life!
It’s worth contacting him to avoid any disappointments. He can’t help everyone but will do his best to help you achieve your goals.
I am building and look to close in 4months, I am working with a credit repair and have paid off all current items. Can anyone tell me how long it takes for your effords of cleaning up things afftects your score?
Hello, I am a Sr. Loan Offcier with IndyMac Mortgage Services. I have closed several FHA loans with a minimum credit score of 580. We close LOANS in EVERY STATE. If you are in need of a lender or have any questions,please contact me. 888-407-3863 ext 7480
Dana Cook
dana.cook2@owb.com
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