FHA Minimum Credit Score Lowered by Lenders

The Federal Housing Administration (also known as FHA) is a government agency within the U.S. Department of Housing and Urban Development which “backs” or provides mortgage insurance for mortgages made by FHA-approved lenders. It was created in 1934 in response to the Great Depression and the housing crisis that ensued to provide affordable housing options to the public and to stimulate the economy through those home purchases.

FHA loans are popular due to the 3.5% down payment allowed and more-lenient underwriting criteria. These loans are popular among first time homebuyers and would-be homebuyers getting back on their feet after a foreclosure or bankruptcy

In order to qualify for a FHA loan, requirements must be met including minimum buyer FICO credit scores which are set by both FHA and the lender. The average minimum score allowed by most lenders was 640 and recently was reduced to 580 by major FHA lenders. However, FHA itself only requires a 500 minimum FICO score with additional down payment required for those in the 500-580 range.

Lenders often have stricter requirements than the FHA requirements which can be confusing to buyers who think they just need to make the FHA requirements. However, lowering of the minimum FICO credit scores by many leading lenders could spell opportunity for qualified buyers.

If you think you or someone you know could benefit from an FHA loan but want to understand more, please give me a call. I work with a number of lenders who offer FHA mortgages and can help you find the right mortgage for your finances and what you are planning on purchasing. Call me at (253) 732-0534 or send an email to: sue@suerand.com.

Sources:

http://themortgagereports.com/14466/fha-credit-score-minimum-approval-mortgage-rates

http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/fhahistory

http://www.latimes.com/business/realestate/la-fi-harney-20150118-story.html