Minimum Credit Scores Announced for FHA Mortgages

In a release by the Department of Housing and Urban Development new credit score and loan-to-value LTV ratio requirements have been introduced. These changes will be effective for cases after October 4, 2010.

• Borrowers with a minimum decision credit score at or above 580 are eligible for maximum financing.
• Borrowers with a minimum decision credit score between 500 and 579 are limited to 90 percent LTV.
• Borrowers with a minimum decision credit score of less than 500 are not eligible for FHA-insured mortgage financing.
• Borrowers with a non-traditional credit history or insufficient credit are eligible for maximum financing but must meet the underwriting guidance in HUD 4155.1 4.C.3.
• Borrowers using 203(h), Mortgage Insurance for Disaster Victims, are eligible for 100 percent financing and no down payment is required, provided that the borrowers have a minimum credit score of 500 (borrowers with decision credit scores below 500 are not eligible for FHA financing).

Now is the time to buy. With interest rates at record lows, and a surplus of inventory buyers can have the house of their choosing. The first step to home ownership is to contact a mortgage lender to see where you stand credit wise and how much of a loan you may qualify for. Once you find out how much house you can afford then you can shop the market for homes that fall within your specified criteria.

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