March 27, 2015
A reader sent us a question via our comments section recently, asking:
“I HAVE A CREDIT SCORE OF 591, I HAVE WORKED FOR MY JOB FOR 18 YEAR. I WOULD LIKE TO PURCHASE A HOME AND AM WORKING ON MY CREDIT WITH MY CREDIT UNION. WHAT MORTGAGE COMPANY WOULD WORK WITH ME TO GET A HOME? I DON’T HAVE MONEY FOR A DOWN PAYMENT”.
Unfortunately, FHA home loans do not offer a zero downpayment option. FHA loan rules found in HUD 4155.1 states clearly that a “minimum borrower cash investment” or downpayment is required. The minimum down payment on any new purchase FHA home loan is 3.5% of the sale price or appraised value of the home (whichever is lower).
That information is found in HUD 4155.1 Chapter Five Section B, which states:
“Under most FHA programs, the borrower is required to make a minimum downpayment into the transaction of at least 3.5% of the lesser of the appraised value of the property or the sales price.”
“Additionally, the borrower must have sufficient funds to cover borrower-paid closing costs and fees at the time of settlement. Funds used to cover the required minimum downpayment, as well as closing costs and fees, must come from acceptable sources and must be verified and properly documented.”
Borrowers should take note–the FHA minimum FICO score (580 and above for maximum financing, with credit scores between 500 and 579 requiring a higher down payment) is a baseline only.
The lender can and often does require a higher FICO score in order to work with an FHA loan applicant. You may be expected to bring a credit score of 620 or higher in order to be approved for an FHA loan. The lender’s standards may vary from company to company.
Do you have questions about FHA mortgage loans? Ask us in the comments section.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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