FHA Home Loan Credit Score Requirement Changes October 2010

As of October 4, 2010 there were some significant changes to the FHA Home Loan Credit Score requirements for home buyers with less than perfect credit and credit scores less than 620.

If you are buying a home using an FHA home loan you will now have to comply with newly implemented credit score requirements. This is a huge departure from how FHA has done things up to now when it comes to credit scores. Up to these changes, as long as you have had good credit in the prior 12 months to when you applied for your mortgage (or got your mortgage) you had a good shot at getting approved for maximum financing on an FHA home loan. Maximum financing is currently 96.5% loan to value, or 3.5% down payment.

Now with these changes for FHA home loan credit requirements you will have to have more down payment money as your credit score goes down.

Summary of FHA loan credit score requirements:

  • If you have a middle credit score (or the lower of two credit scores) at or greater than 580 you will be eligible to qualify for 3.5% down payment financing.
  • If your middle credit score (or the lower of two credit scores) is between 500 and 579, then you will need 10% down payment and the max loan amount you can finance with FHA is 90% loan to value.
  • If your middle scores is less than 500 you will not be eligible to qualify for an FHA home loan.
  • If you do not have credit or a credit scores, you may still be eligible to qualify for 3.5% down payment financing from FHA but there are more requirements you must meet to qualify with non-traditional credit.

One additional loan scenario is possible under the FHA changes of October 2010 and that is of those borrowers using 203(h), Mortgage Insurance for Disaster Victims, are able to qualify for 100% financing with no downpayment provided the borrower has a qualifying credit score of 500 or greater.

All of these changes affect all of FHA’s single family loan programs except Title I loans, Reverse Mortgages or Home Equity Conversion Mortgages, and HOPE for Homeowners plus a few more exceptions. For these additional exceptions you should speak to a FHA lender for details.