FHA loan requirements credit score

FHA loan requirements credit score

FHA changed it's minimum credit score requirements. FHA now requires a minimum credit score of 500 to be eligible for a FHA loan.

The FHA has taken the following steps

• FHA credit score minimum is 500
• Update the combination of credit scores and down payments for new borrowers
• New borrowers will now be required to have a minimum credit score of 580 to qualify for FHA 3.5% down payment program
• New borrowers with less than a 580 credit score will be required to put down at least 10%
• FHA loan requirements credit score minimum is 500

Collection accounts 

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.

• If evidence of a payment arrangement is not available, the lender must calculate the monthly payment using 5% of the outstanding balance of each collection, and include the monthly payment in the borrower’s debt-to-income ratio.

Closing cost

FHA allows the seller to pay up to 6% of your closing cost.

If you are buying a $100,000.00 house FHA allows the seller to pay up to $6,000.00 for your closing cost. It must be in writing in the sales contract, "Seller will pay up to 6% of buyer's closing cost."

If you do not write it into the sales contract then you will be paying all of the closing cost. Closing cost average around $5,000.00 - $6,500.00 depending on taxes, hazard insurance and who's paying the transfer tax and owner's title insurance, etc.

To buy a house using an FHA loan you will need a minimum of 3.5% down payment plus closing cost. On a $100,000.00 purchase you will need $3,500.00 (down payment) plus $6,500.00 (closing cost). You will need around $10,000.00 if you are paying all the closing cost.

By allowing the seller to pay for your closing cost you will decrease the amount of out of pocket cash required to buy a home. Buying a $100,000.00 property requires $3,500.00 down payment and if the seller pays $6,000.00 for your closing close. You will only need an extra $500.00 to cover your closing cost. By using a seller contribution for closing cost you will only need around $4,000.00 to buy a $100,000.00.

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