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Minimum Credit Score Required For FHA Loans: 620 or 640?

by Justin McHood on February 2, 2011

For many people who are searching for information about FHA loans, one of the key pieces of information they are looking for has to do with the minimum required mid credit score.  Many lenders are now at 640 and a few advertise 620 or maybe even a few even lower.

And if you are searching for the answer to the question “what is the minimum credit score required on an FHA loan?” the answer is:

The minimum required credit score for an FHA loan will vary by lender but most lenders are in the 620-640 range.

To confuse matters further, another little-known fact is that although many FHA lenders have different minimum credit score requirements, they change their requirements often.  Because of this, it is possible for you to ask a lender about their minimum credit score requirements for FHA loans this week and get an answer of “640” only to have the guidelines change next week and then they can do a minimum 620.

One recent example of a lender changing their minimum credit score guidelines from 640 to 620 came with “more information” about the change along with some more “requirements” that were associated with the easing down to 620:

Note – A few conditions that must be present for these loans include:

  1. Maximum PITIA may not exceed 33% of total qualifying income
  2. Maximum total monthly obligations including PITIA may not exceed 45% of total qualifying income
  3. Rescoring borrower to raise FICO to meet parameters is not acceptable and not allowed
  4. 2 months of reserves will be required covering 2 full months of PITIA for subject property
  5. Gift funds are not allowed for down payment, closing costs, prepaids, reserves or any other purpose (i.e. debt pay offs)
  6. Price hits for this FICO range will be administered and disclosed by Secondary on the rate sheet.
  7. Not eligible for Refinance transactions
  8. Not eligible for ARM’s
  9. Not eligible for non-occupant co-borrowers
  10. Not eligible for the FHA 203K loan programs
  11. Not eligible for flips that fall into the 0-90 day time frames

If you are in a situation where your current credit score is close to the minimum of what at least one lender requires, be sure to ask plenty of questions to your loan officer and know these things: first, guidelines are always changing and second, chances are that there are more guidelines than just a minimum score that you might need to worry about.

Justin McHood

Justin McHood is a Mortgage Commentator living in the Phoenix, Arizona area and is happy to answer any mortgage-related questions that you may have.
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