The Department of Housing and Urban Development’s FHA loan program doesn’t require a minimum score. However, FHA lenders do. FHA lending guidelines require FHA lenders to determine the borrower has met certain minimum credit standards such as timely rent payment, payments on non-deferred student loans and revolving and installment credit accounts. Borrowers with a credit history showing responsible payment patterns will have a credit score calculated high enough to meet FHA lender minimums.
Most lenders ask for a minimum credit score of 620, although this is down from 640 which many lenders used up until a year ago. However, as the FHA home loan program has returned to profitability, many lenders are lowering the minimum threshold to 580, a full 40 points below the 620 minimum. This is a positive move and allows those who couldn’t previously qualify due to credit issues may not see an FHA loan approval in their future. Those borrowers who experienced a loss of job or other significant life event saw their credit profiles damaged but many have repaired what was broken and are on their way back.
Different lenders can have different lending requirements so just as one FHA lender may accept an approval with a 580 score doesn’t mean all lenders will. For example, if a borrower has a credit score of say 590 but has more than two rental payments more than 30 days past the due date within the past year may find an approval difficult while a borrower with a 585 score and no such late rental payments can find an approval.
If you’re in a situation where you’re not sure if your credit score is good enough, all it takes is a phone call and we can help put you on a path to home ownership using the FHA loan program. If you want to buy but are holding back, what do you really have to lose?