August 20, 2015
One of the most common questions about FHA home loans centers around FICO scores. Many borrowers wonder why their FICO scores may or may not be good enough to get FHA loan approval.
FHA loan rules have minimum FICO scores defined in HUD 4155.1, but the confusion comes when a borrower who knows these minimums gets told their scores aren’t high enough for maximum financing or loan approval, depending on circumstances.
The reason for this is simple: FHA loan minimums aren’t necessarily the lender’s minimum standards for FICO scores. The lender is free to require higher FICO minimums as long as that requirement is enforced in compliance with federal law.
The minimum FHA FICO score requirement of 580 or better for maximum financing isn’t always what the lender will require–your lender may require a minimum FICO score in the low-to-mid 600s, for example, to qualify for the mortgage loan.
The best thing a potential borrower can do before filling out loan application paperwork is to contact the lender and simply ask what that financial institution’s minimum FICO score requirements are. It’s a very good idea to do this with a variety of lenders to see what might be possible depending on the company’s standards. You may find some lenders more lenient than others, depending on the FICO scores and related financial qualifications you bring to the table.
If a borrower is concerned about their FICO scores, this is a very good first step toward knowing what to expect from a given lender. Borrowers who aren’t sure their FICO scores are high enough to qualify for an FHA home loan can call the FHA/HUD directly at 1-800 CALL FHA to request a referral to a HUD-approved local housing counselor who may be able to help with advice on becoming ready for a new FHA loan application.
Those working in residential real estate should know about a new, free tool offered for real estate websites–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 at 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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