December 2, 2022

FHA Introduces New Minimum 580 Credit Score Requirement

The FHA is introducing new guidelines on loan to value ratios and the minimum credit score required for FHA borrowers.  As detailed in a Mortgagee Letter from the Department of Housing and Urban Development (HUD), the following credit requirements will apply for FHA borrowers, effective October 4, 2010.

  • To be eligible for maximum financing, borrowers will need a minimum credit score of 580 or higher.
  • Borrowers with a credit score between 500 and 579 will be limited to a loan to value of 90%.  A sub 580 FICO credit score borrower will henceforth need to make a 10% minimum down payment on a purchase transaction.
  • All  borrowers with a credit score below 500 will not be eligible for FHA-insured mortgage financing.

HUD’s newly introduced minimum credit score and loan to value requirements will apply  to all single family loan programs, except for Reverse Mortgages (Home Equity Conversion Mortgages) and Hope for Homeowners.

The new credit requirements are not expected to dramatically change the number of FHA mortgage approvals.  Most  lenders had already imposed a minimum credit score requirement of 640 or higher for FHA borrowers.  In limited cases, borrowers with scores between 620 and 639 could still obtain mortgage approval.

Many potential FHA borrowers with scores below 640 who cannot obtain mortgage approval may be left wondering why this is the case if the FHA has established a minimum score of only 580.  The explanation for this is that the FHA does not make mortgage loans but rather insures FHA loans made by lenders.  Despite the FHA insurance, banks do not have an iron clad protection from loss.

To protect themselves from loss exposure, FHA lenders impose various requirements that may include establishing higher minimum credit scores.   Some of the factors that influence banks in their assessment of risk on FHA loans are discussed below.

More and more banks are increasing the minimum credit score on FHA loans to attract a better overall execution (sales price) on their securities which improves profitability.  Nonetheless, the increase in the minimum credit score isn’t always about protecting the bank on a potential future loss.  In a lot of cases a bank feels more comfortable with a profit model that positions itself as a mortgage seller with a higher weighted average credit score on their pool for many other factors.

A credit score is an 18 month predictive measure of future performance but is not as reliable when a state or region is hit by some unpredictable negative economic factor.  An increase in the minimum credit score can be used as an override to protect against losses resulting from a sudden downturn in the economy.

Each bank executes a contract of sale with defined representations and warranties on their future liability.  The penalty (or loan buyback provision) is legally defined in the contract between seller and buyer of the loan.  However, not all contracts are the same with regard to liability issues.  When a loan default occurs, a post closing quality control review takes place.  If the loan originator was negligent with respect to due diligence, the bank is subject to full recourse provisions and required to repurchase  the loan which usually results in large losses to the bank.  An example of this occurred recently when Bank of America announced that Fannie Fae and Freddie Mac were demanding $10 billion of loan repurchases.

Given the complexities and potential losses to banks on the origination and sale of FHA loans, it is unlikely that banks will be decreasing their minimum credit score requirements any time soon.

More On This Topic

Sub 620 FICO Score FHA Lenders

What Are My Odds Of FHA Loan Approval With A FICO Score Below 620?

Basic Requirements To Be Eligible For FHA Financing

Comments

  1. What lenders go below 620 on FHA (or any other mortgage). Have 10% down in WISC.

  2. Ruthe Farmer Broker says

    Would you please give me names of banks that are involved with this new requirement? tks…

  3. I do not know anyone that is approving FHA loans with credit scores under 640… I have the funds for downpayment and debt to income ration is very low – but need financinf to get into a home… NO ONE is approving, please share your contacts…

  4. James,

    I refer my clients to Dan Bello. His contact info is below. They offer the FHA loan with credit scores between 580 and 639!

    Daniel Bello
    Loan Officer
    Prospect Mortgage
    NMLS# 79475
    1 Pleasure Island Rd., Suite 2C
    Wakefield, MA 01880
    Office: (781) 245-4694
    Cell: (781) 738-6899
    Fax: (800) 721-7571
    Daniel.Bello@prospectmtg.com

  5. Update to previous Post

    Sorry everyone … Dan Bello from Prospect Mortgage ONLY covers Massachusetts!

  6. David Gutierrez says

    I am a loan officer in Texas, and have programs that go down to 580. If you are trying to get a mortgage in Texas, call me.

    David Gutierrez
    Sr. Loan Officer – NMLS# 359225
    505 N. Sam Houston Pkwy E. Ste 630
    Houston, TX 77060
    713-584-5506 direct
    281-817-5871 fax

    “Ask me about our 580 fico loan program “

  7. Does anyone know of a mortgage company in NJ that will give a FHA loan with a fico of 590?

  8. Hello,

    I am in Michigan with a middle score of 633. I have yet to find a lender that will approve under 640 in Michigan. Please help because I am ready to buy.

    Lonnie at Yedwards2004@yahoo.com

    Thank you

  9. Since this article was written, FHA minimum scores went up to 640 for almost all lenders. I work for PrimeLending, A PlainsCapital Company. PrimeLending secured an exception from investors, allowing me to offer FHA loans to borrowers with credit scores of 620 and higher.

    Borrowers should be aware there are additional qualifications beyond just your credit score. If you have questions about FHA home financing with credit scores 620 and above, please contact me. I can close FHA loans for borrowers in all states except Massachusetts. 30-day closings are available. No application fees.

    Max Leaman
    Branch Manager/Sr. Loan Officer
    PrimeLending, A PlainsCapitalCompany
    4501 Spicewood Springs Rd. #1025
    Austin, TX 78759
    Cell:(512)293-1239
    Fax:(866)425-0637
    Office:(512)617-5636
    NMLS #: 151263

    Apply online at http://www.MaxLeaman.com.

  10. We will begin next week to offer VA LOANS WITH NO ORIGINATION AND NO APPRAISAL FOR IRRLS. YES ON VA IRRLS NO ORIGINATION AND NOT APPRAISALS. TEXAS ONLY. NEED CREDIT SCORE OF 640 AND ABOVE. IF YOU DO NOT HAVE THIS SCORE E-MAIL ME AND I WILL GET YOU IN CONTACT WITH A COMPANY WHO WILL BEGIN CREDIT REPAIR WITH NO MONEY DOWN UNTIL YOU SEE RESULTS! FINALLY A CREDIT REPAIR OPTION THAT HAS NO UP FRONT FEES. PLEASE E-MAIL ME. AGAIN THIS IS FOR TEXAS RESIDENCE, BUT THE CREDIT REPAIR IS NATION WIDE.

    VA IRRLS NO APPRAISALS AND NO ORIGINATION BEGEINING NEXT WEEK!

    andre@firstratemortgageinc.com

  11. WE OFFER A TRUE ALTERNATIVE TO MORTGAGE FORECLOSURE AND TAX FORECLOSURE. IF YOU ARE AGE 62 AND OLDER, OWN YOUR HOME OR HAVE EQUITY IN YOUR HOME WE CAN STOP FORECLOSURE. IT DOES NOT MATTER IF YOU ARE BEHIND ON MORTGAGE. IF YOU ARE NOT IN FORECLOSURE AND NEED THE MONEY TO BAIL OUT A FAMILY MEMBER THEN THIS TOO WORKS. ONLY FOR TEXAS RESIDENTS. I WIL SHOW YOU HOW TO LEAVE YOUR HOUSE OR MONEY TO YOUR FAMILY! THIS PROGRAM DOES WORK FOR OTHER STATES, IT’S JUST WE ARE ONLY LICENSED IN TEXAS. MORE STATES WILL BE ADDED LATER. CREDIT SCORE NOT REQUIRED, INCOME NOT NEEDED EITHER. JUST BE 62 OR OLDER AND OWN OR HAVE EQUITY IN YOUR HOME. THIS IS A GOVT LOAN!!!!

    andre@firstratemortgageinc.com

  12. selma stenson says

    Any loan officers in the state of GA that approves loans with 580 score

  13. I would like too know of any 580 credit score loans for the New York,New Jersey area. Thanks

  14. Hello,

    I would like to know of mortgage lenders loaning to 580 in the Phoenix, AZ area.

    Thank you

  15. Has anyone heard someone in Raleigh, NC that excepts a 580?
    Thankyou!!!

  16. Anyone in CA that approves loans with 601 score?

  17. jeff quilon says

    i have a very good income but my credit score is 590. any lender that can finance a house worth $180000 in california (contra costa county)?

  18. David Gutierrez says

    **UPDATED I am a loan officer in Texas, and have programs that go down to 580. If you are trying to get a mortgage in Texas, call me.

    David Gutierrez
    Sr. Loan Officer – NMLS# 359225
    505 N. Sam Houston Pkwy E. Ste 630
    Houston, TX 77060
    713-584-5506 direct
    281-817-5871 fax

    “Ask me about our 580 fico loan program “

  19. I’m at a 588 and rising…great income… trying to purchase a single family home for $150,000….having difficulty, any advise on possibly VA or FHA thx

  20. christine schultz says

    I have a 582 FICO and I am trying to buy a foreclosure in KY (I’m moving there/same employer transfer job) If anyone can find a mortgage or lender with these circumstances I would appreciate it! I make 52K/yearly! Thank you!

  21. I have mid score 603 first time buyer wanting to purchase home in texas.Been turned down was told 640 needed for fha loan.

  22. Andre Green says

    I have a mid-score of 611 and rising. Great income – $88k/yr. I’m in Detroit, Michigan. Trying to buy the home I’ve lived in since Oct 2007. Was paying rent of $1900.00/mth with no problem. Any help or suggestions would be greatly appreciated.

    Regards,

    Andre Green
    (313)623-3102
    agreen06@comcast.net

  23. Deangila Chatman says

    We are currently trying to purchase a home. We have a 584 fico score. We would like an FHA home loan. We need to know what bank can finance us A.S.A.P!

  24. Laurie Lynn says

    We are currently trying to buy a home in Indiana and I have a 590 FICO score. I currently own my home but our family is getting bigger and we need a bigger home. I’m going to sell my home and put most of the money as a down payment on the new mortgage, but need to finance the rest. My late husband passed away a year and half ago and I paid most of my debts off then including my home that I own. My debt to income ratio is very good. I’m trying to just get a mortgage. Please let me know where I can go? A.S.A. P

  25. Shelley Akers says

    I am also looking for information on financing with fha lenders in the state of ohio with a credit score a little under 620.

  26. looking for lender in iowa or nebraska for score 620 and under for 125000 single family home. looking to buy soon send qualifications to email. i will get back to you as soon as i can (with in 24 hours)! email me…

  27. Brandy Brownell says

    We are trying to qualify for a home purchase of $137k in Mississippi. Combined income more than $100k/year. Debt to Income ratio very low. Voluntarily dismissed Chapter 13 in 2006. Excellent payment history since then. FICO score still 580 because of old derogatory accounts that are still reporting. Are there any mortgage companies out there still wanting to make money???

  28. Hi Brany it seems that you need to someone who can show you how to reestablish your credit. Check out http://www.ncesnow.org. National Credit Education does a great job on helping you to rebuild your credit. Then you will be ready to buy your home. email me at marquand.price@cbtec.com

    Thanks
    Jermaine Price

  29. 520 (and building) score in Oklahoma, debt to income ratio is low, steady job, saved $15,000 for down payment. If anybody can finance me, let me know. msanders2264@ymail.com

  30. Looking for a fha lender in Indiana that is currently dealing with credit scores that are around 560. Found a home, now we need help buying it. Please, please anyone that knows someone who could help with this please let me know. Thank you so much.

  31. kasonya coteat says

    i live t\in the state if ohio im trying to find home loan that deals with a credit scores of 586

  32. I have mid score 596 and rising. Looking to purchase home in Texas in late May or June of 2012. Can anyone help.

  33. Anyone out there that can help out with a 548 credit score? Looking to buy house for $105,000 in NC. Wife and I make almost $100K per year together but credit has been tarnished by medical bills that have gone into collections. If you think you can help, please contact me ASAP!!

    coachboykin@windstream.net

  34. Did anyone on here get a responce that there is actually a company that is willing to work with a credit score of 587?

  35. looking for a lender that will help me out. i have a 580 credit score. i am a first time buyer. i make around $80,000 a year. i live in west virginia. any help will be greatly appreciated.

  36. Looking to buy a townhouse in Reno NV for $70k and I earn over $60k a year. My mid score is 608. Does anyone know of a lender that will go under 620 in NV? Been on the job for over 18 years…doesn’t that account for something?

  37. Looking for a lender to give an FHA mortgage to us with scores between 580-640. NEW YORK lenders please! We currently own a home and it will be rental income/investment. Scores are 600-610 and we need a lender to approve us.

  38. To clarify the home we currently own will be our rental/investment property. Looking to buy another home for our priomary residence. NEW YORK LENDERS PLEASE!!!

  39. Does anybody know of any loan officers that approve loans of credit score of 580 in Maryland, DC or Northern Virginia?

  40. Are there any financial institutions in New Jersey that are offering FHA mortgages for a “re-fi” with an improving 580 credit score and a loan to value ratio of 80%,

  41. I am a firefighter with a 584 middle credit credit score looking to purchase in NJ. Are there any lenders willing to help?

  42. Looking for a lenders who works with people with a FICO’s are lower then 600; within DC-MD-VA.

    Thank you

  43. i live in missouri have found the perfect extremely affordable home i have contacted fha middle score 611 as of two weeks ago.i am now working with lexington law to improve my scores my issue is how can i speed this up to get at least a pre approval letter to put a bid in on this home i am afraid it wont be for sale for long

    or is there lenders that will go that loan asking price now is 99,000 i have 4500 for down payment and money saved for closing costs

  44. Al johnson says

    Looking for mortgage with 580 score in Fulton county Georgia

  45. Al johnson says

    Looking for 580 mortgage in Fulton county ga
    My email is aljohnson0122@yahoo.com

  46. Antionette Henderson says

    Looking for 580 mortgage in Charleston, SC??? Pls help

  47. Does anybody know of any loan officers that approve loans of credit score of 580?Looking for a 580 mortgage in Franklin,Ohio?

  48. I am in Sacramento, CA. Want to buy a $290,000 house, self-employed with very little document to show income, and low credit score, 590. But I can put down 30% down payment for the house, any loan officer can help?

  49. Luccky03 says

    I am in Missouri and looking for a home mortgage lender who I can get a home loan with a 582 fico and only one late on my car that I thought I had paid on time but obviously didn’t back in November, but became current as soon as I discovered it. I have money saved. Thank You so much

  50. I live in CA and wanting to purchase a home with a fico of 580. have 20% down.

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