September 29, 2015
When the FHA loan rule book (HUD 4000.1) lists its minimum FICO score requirements, some people forget that these requirements are minimums and that participating lenders are free to require higher FICO scores, and often do.
We get plenty of reader questions about FHA FICO score requirements–here’s a recent example:
“I have my 3 FICO scores they are 633,601, and TransUnion is 565…I have credit but some late payments the last being December 2014…My question is do you think I could get a FICO loan for the mortgage or would I need to bring my FICO up?”
The answer to the reader’s question is complex for two reasons–lender standards apply and while based on what’s listed here the reader technically qualifies for an FHA mortgage loan, the lender’s FICO score requirements may start, as they are known to do depending on the lender, at 620 or better. Marginal FICO scores (in the eyes of the lender) would require compensating factors.
Compensating factors may include a higher down payment or other financial considerations. But the late payments issue could render any compensating factors a moot point. If a borrower comes to the FHA loan process with anything less than 12 months of on-time payments for all financial obligations, it could jeopardize the FHA loan application.
Naturally there are some home loan and refinance loan programs designed to help borrowers catch up on missed mortgage payments, but outside of such program requirements, the “12-month rule” should definitely be respected as it is a very important factor in how your lender determines your creditworthiness.
Borrowers who need assistance evaluating their ability to get an FHA mortgage loan because of such issues should contact the FHA directly and request a referral to a HUD-approved housing counselor who may be able to help. Call the FHA at their toll-free number, 1-800 CALL FHA.
Do you work in residential real estate? You should know about the free tool offered by FHA.com, designed especially for real estate websites. It’s a widget that displays FHA loan limits for the counties serviced by those websites.
It’s simple to spend a few seconds customizing the state, counties, and widget size for the tool; you can copy the code and paste it into your website with ease. Get yours today: http://www.fha.com/fha_loan_limits_widget
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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