October 24, 2014
Thinking of buying a home and want to know FHA loan requirements?
We hear it all the time!
What's the minimum credit score for an FHA loan approval?
The answer is. It depends on who you ask!
After the financial crisis of 2008 all the major banks raised their credit standards for approving FHA loans. Because the banks make the rules for loans they will approve, they may require a minimum credit score of 640 for their loans. These guidelines are the bank's guidelines. What this means is, all the major banks including Wells Fargo, Bank of America, Chase, Citigroup, etc. banks make the rules for loans they will approve.
When you apply for an FHA mortgage at a major bank and they tell you their minimum credit score requirement is 640. This does not mean that it's FHA's minimum credit score requirement. It means that they are the bank's credit score requirements.
Mortgage World Home Loans of New Jersey is a licensed mortgage broker and will match you with the lender that will approve your FHA loan.
Credit score - FHA announced a new policy to address risk. FHA has changed the minimum credit score for new borrowers:
FHA Back to Work Program - New borrowers may also be eligible for an FHA insured loan on a purchase transaction after 12 months from the completion, discharge, trustee's sale if the borrower meets the requirements for extenuating circumstances Economic Event.
Borrowers with a prior bankruptcy, foreclosure, deed-in-lieu, or short sale may be eligible for an FHA insured loan if the bankruptcy, foreclosure, deed-in-lieu, short sale was the result of a documented extenuating circumstance.
Collection accounts - New the FHA does not require collection accounts to be paid off as a condition of mortgage approval. However, FHA does recognize that collection efforts by the creditor for unpaid collections could affect the borrower’s ability to repay the mortgage.
Debt-to-income ratio - FHA loan requirements include a maximum debt to income ratio. When a borrower applies for an FHA mortgage, they are required to disclose all debts, open lines of credit, and all possible approved sources of regular income. Using this data, the lender and FHA can calculate the borrower's debt-to-income ratio.
Are you a first time home buyer?
Get pre-approved for an FHA loan online.